In the wake of several setbacks and disappointing performances from its recent game releases, Ubisoft is facing pressure from one of its investors to undergo a significant restructuring. This includes the installation of a new management team and a reduction in staff numbers.
Ubisoft Minority Investor Urges to Restructure Company
Last Year's 10% Workforce Reduction Not Enough According to Aj Investment
Aj Investment, a minority shareholder in Ubisoft, has publicly called for a major overhaul of the company. In an open letter addressed to Ubisoft's Board of Directors, including CEO Yves Guillemot and Tencent, Aj Investment expressed deep dissatisfaction with the company's current performance and strategic direction. They urged Ubisoft to go private and replace the existing management team, stating, "As a significant minority shareholder in Ubisoft Entertainment via Aj Investment and our partners, we are writing to express our deep dissatisfaction with the current performance and strategic direction of the company."
The investors pointed to the delays of key titles like "Rainbow Six Siege" and "The Division" until the end of March 2025, as well as Ubisoft's lowered revenue forecasts for Q2 2024, as reasons for their heightened concerns about the management's ability to deliver long-term value to shareholders. Aj Investment proposed a change in leadership, suggesting, "Change of the current management. Start hiring process of NEW CEO who will optimise the cost and studio structure for more agile and competitive company as Ubisoft should be."
Following the release of the letter, Ubisoft's share price reportedly fell, dropping "more than 50% over the past 12 months," according to the Wall Street Journal. A Ubisoft spokesperson declined to comment on the letter.
Aj Investment criticized the current management, stating, "The main reason why the valuation is so low compared to the peers is that Ubisoft at current state is mismanaged and shareholders are hostages of Guillemot family members and Tencent who take advantage of them." They further argued that the management's focus on short-term quarterly results was detrimental to long-term strategy and the gaming experience.
Juraj Krupa from Aj Investment expressed disappointment over the cancellation of "Division Heartland" and criticized the releases of "Skull and Bones" and "Prince of Persia Lost Crow" as underwhelming. He highlighted the neglect of popular franchises like Rayman, Splinter Cell, For Honor, and Watch Dogs, despite their significant fan bases. Krupa also mentioned that while "Rainbow Six Siege" performs well, the recent release of "Star Wars Outlaws" did not meet expectations, contributing to a decline in Ubisoft's share price to its lowest since 2015, with a drop of over 30% since the start of the year.
Krupa also advocated for a reduction in Ubisoft's workforce, noting that competitors like Electronic Arts, Take-Two Interactive, and Activision Blizzard achieve higher revenues and profitability with fewer staff. He pointed out that Ubisoft employs over 17,000 staff, compared to EA's 11,000, Take-Two's 7,500, and Activision Blizzard's 9,500. Krupa suggested that Ubisoft "needs to implement significant cost reductions and staff optimization" to enhance operational efficiency. He recommended selling studios not essential for developing Ubisoft's main IPs, stating, "Ubisoft has over 30 studios, it's obvious to every investor that this structure is too large for Ubisoft and its profitability going forward."
Despite Ubisoft's recent layoffs, which reduced the workforce by approximately 10%, Krupa argued that this was insufficient. He acknowledged Ubisoft's strategy to cut fixed costs by 150 million EUR by 2024 and 200 million EUR by 2025 but insisted that more aggressive measures were needed for Ubisoft to remain competitive in the global market.
