Swedish gaming giant takes hit on stock exchange after deal falls through

Sweden's Embracer said it is lowering its outlook after a major strategic partnership fell through.

Swedish gaming giant takes hit on stock exchange after deal falls through
Embracer CEO Lars Wingefors. Photo: Jessica Gow/TT

“Late last night, we were informed that one major strategic partnership that has been negotiated for seven months will not materialise,” Embracer CEO Lars Wingefors said in a comment.

Wingefors added that the decision by the unnamed prospective partner to pull out was “unexpected”.

According to Embracer, which owns the “Borderlands” franchise and the licence for popular game “Tomb Raider”, the deal included more than $2 billion in “contracted development revenue over a period of six years”.

It would have also allowed catch-up payments for “already capitalised costs for a range of large-budget games” and would have notably improved “medium-to-long-term profit”.

Coupled with a number of delayed titles, the cancelled partnership meant the company was lowering its projections for its 2023/2024 financial year.

Embracer is now expecting to generate seven to nine billion kronor ($657 million to $845 million) in adjusted EBIT (earnings before interest and taxes) for the year, compared to the previously expected 10.3 to 13.6 billion kronor.

When the Stockholm stock exchange closed Wednesday, shares in Embracer were down by more than 44 percent.

At the same time, the publisher reported a 121-percent increase in net sales to 37.7 billion kronor for its full financial year, which runs from April to March.

Its net profit more than quadrupled from 976 million to 4.45 billion kronor.

The publisher, based in the western Swedish town of Karlstad, has been on an acquisition spree for several years and recently announced a huge “Lord of the Rings” game with Amazon.

According to Embracer it has 138 internal game development studios and morethan 16,600 employees in over 40 countries.

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Sweden ranked second most innovative country in the world

New figures from the Global Innovation Index show that Sweden is the world's second most innovative country, behind only Switzerland.

Sweden ranked second most innovative country in the world

“This provides hope for the future,” Peter Strömbäck, director-general of the Swedish Intellectual Property Office, said.

The index, carried out by the World IP Organisation, a UN organisation, puts Sweden ahead of countries like the US, Germany, Korea and China.

“This gives an image of how the country is performing,” Strömbäck said. “Sweden is doing well with regards to creating knowledge assets, that is to say immaterial assets, and making use of them with the help of intellectual property rights, among other things.”

Sweden invests heavily in research and aims to have high-quality universities, he explained, adding that a key reason for its success in innovation was the way it made use of the good ideas produced at these universities and turned them into concrete products or services.

“We’re good at a lot of things related to energy and the green transition,” he said.

One example of an area where Sweden is performing well is the IT sector, where Swedish innovations and companies are behind many developments in mobile phones. Another bright spot is its life science companies, which have produced important medical innovations on the back of which successful businesses have been built.

Strömbäck believes there will be even more of a focus on energy and the green transition in the future.

“If we didn’t have this power of innovation I would be worried. How would we be able to meet the climate challenges? But I’m happy now,” he said.