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French video game maker Ubisoft increases writedowns and lowers targets

French video game maker Ubisoft holds annual news conference in Saint-Mande, near Paris

By Mathieu Rosemain

PARIS (Reuters) - Ubisoft is increasing its writedown estimate to 500 million euros ($538 million) and cutting its full-year revenue target after ending 2022 with weaker-than-expected sales, the French video game maker said on Wednesday.

Ubisoft cited the deteriorating economy, marked by lower spending on non-essential goods, to explain the acceleration of the depreciation, previously targeted at 400 million euros.

The group is also postponing the release of its game "Skull and Bones", and plans cost cuts of 200 million euros over two years, including for staff reduction, Chief Financial Officer Frederick Duguet said in a call with reporters.

Duguet declined to elaborate on the size of the staff reduction, which will be made through attrition, the company said. It is now expecting full-year net bookings to be down by more than 10%, compared with a previous target of growth of 10%, it added.

Net bookings in the third quarter are now expected at 725 million euros, down from a previous estimate of 830 million euros. Ubisoft's fiscal year ends on March 31.

"There was significantly weaker spending around the critical sales period," Duguet said in the call.

"The biggest brands took a larger-than-expected market share, which led to less spending on other games," Duguet added.

Chief Executive Officer Yves Guillemot said in a statement the company was surprised by the weak performance of its "Mario + Rabbids: Sparks of Hope" game at the end of last year, a crucial period for the sales of video games.

Ubisoft said it was targeting operating income of around 400 million euros for fiscal 2023-2024, after taking into account the less favourable economic environment.

($1 = 0.9300 euros)

(Reporting by Mathieu Rosemain; Editing by Jane Merriman and Richard Chang)