Tomb Raider games firm Embracer tumbles after partnership talks collapse

SWEDISH games group Embracer on Wednesday (May 24) said a large planned strategic partnership had fallen through unexpectedly and that it had lowered its profit guidance, sending shares into a tailspin.

The developer, which last year bought several development studios and the intellectual property rights to a number of games including a new Tomb Raider game, said the deal would have “set a new benchmark for the gaming industry”.

“Late last night, we were informed that one major strategic partnership that has been negotiated for seven months will not materialise,” it said in a statement.

The deal being negotiated included more than US$2 billion in contracted development revenue over six years, it said.

“The deal would have enabled a catch-up payment at closing for already capitalised costs for a range of large-budget games, but also notably improved medium-to-long-term profit and cash flow predictability for the duration of the game development projects.”

Shares in Embracer were down 40 per cent at 0753 GMT, hitting an all time low, with analysts saying the drop was due to the news of the deal as well as the lowered outlook.

Hit by game delays, weaker demand, and “lacklustre” reception for some new games, Embracer on Wednesday reported a fiscal full-year adjusted operating profit of 915 million krona (S$115.5 million), roughly matching a profit warning issued last week.

It said that on top of the partnership deal falling through, it had had to postpone planned releases of a number of games under development, cutting as a result its adjusted profit forecast for the current year to 7-9 billion krona, from 10-14 billion krona seen previously.

Embracer declined to say who the potential partner was. REUTERS