Candy Crush Maker's Results Are Not Sweet Enough For Wall Street
Mia Lindog | | Aug 13, 2014 09:08 AM EDT |
(Photo : Reuters)
Wall Street soured on shares of King Digital Entertainment, developer of mobile game Candy Crush, after it failed to meet revenue expectations.
Although the company's second quarter revenues grew to $594 million compared with $456 million last year, this was short of analyst projection of $608 million. Not even the announcement of a $150 million one-time special dividend was enough to placate investors as share priced tumbled down 20% to a shade over $14 in after-hours trading. This is also much lower than its IPO price of $22.50, which was just four months ago.
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King Digital's warning of a disappointing full year results also did not help and could only heighten investor's jitters on whether the company can sustain the waning popularity of Candy Crush, as well as replicate the profits with its other games.
Candy Crush, a free game that sells virtual items for players to advance, accounts for over 80% of King Digital's sales.
King Digital CEO Riccardo Zacconi admitted that results could have been better, but assured Wall Street that the company continues to do well, pointing to a cash flow of $154 million for the period, according to a report on CNN.com. He added that King Digital's offerings remain popular for the second straight quarter, with three of the top 10 grossing games on the Apple App Store and Google Play Store in the U.S. Zacconni, however, noted that its other games are not growing fast enough to offset the slide in Candy Crush.
Understanding that gamers from its traditional markets in the US and UK are not enough to sustain its growth, the company has been looking to expand overseas to attract new players. In April, King Digital tied up with Chinese tech giant Tencent Holdings, Ltd. for a Chinese version of Candy Crush in the hopes of duplicating its success there.
The partnership is also expected to boost Tencent's effort to lure users to its other services and help it hold off rival Alibaba Group Holding, according to a Reuters report.
Tagscandy crush, Wall Street
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