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Aggressive expansion hits GREE profits, Q1 FY13 down 26% to $120 million

Aggressive expansion hits GREE profits, Q1 FY13 down 26% to $120 million

Japanese social mobile gaming company GREE (TYO:3632) has announced its Q1 FY13 financials for the three months ending September 30.

Net sales were ¥37.9 billion (around $485 million ), up 25 percent year-on-year.

Net profit was ¥9.1 billion (around $120 million), a drop of 4 percent year-on-year.

However, sales were down 5.4 percent quarter-on-quarter, and profit was down 26 percent compared to Q4.

Rising costs

The decline in sequential performance was partly due to an increase in the cost of staff, marketing and commissions to its development partners, up 50 percent to ¥17.4 billion ($220 million).

GREE's sales were also hit by the Japanese government banning the 'gacha' mechanic, which was deemed to be gambling.

The company confessed that its monthly sales (mainly in Japan) hit a low in July but are now increasing again.

Onwards, upwards

Nevertheless, GREE said it will continue its rapid global expansion into 2013.

It recently announced a new studio in Vancouver and purchased Japanese developer Pokelabo for $170 million to increase its internal development capabilities.

It's also signed deals with Yahoo! Japan, and will sign up additional third parties to support its social and monetisation platform.

For example, more than 30 new games for the GREE platform were revealed at the Tokyo Game Show in September.

GREE's global offices

Full on

It expects full year FY13 sales to be in the region of ¥195-205 billion (around $2.5 billion), with net profit in the range ¥46-52 billion (around $600 million).

GREE ended the quarter with ¥38 billion in cash and cash equivalents (around $480 billion).

However, this is down ¥35 billion (around $450 million) compared to the total of 31 July, reflecting both GREE aggressive investment and the drop in sales.

[source: GREE PR/slidedeck]

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Contributing Editor

A Pocket Gamer co-founder, Jon is Contributing Editor at PG.biz which means he acts like a slightly confused uncle who's forgotten where he's left his glasses. As well as letters and cameras, he likes imaginary numbers and legumes.

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