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Netmarble plans IPOs, M&As amid falling share price

PUBLISHED : May 24, 2017 - 16:39

UPDATED : May 25, 2017 - 10:56

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[THE INVESTOR] Netmarble Games plans to list four subsidiaries and seek M&A opportunities to increase shareholder value, according to its CEO Kwon Young-shik.

“We plan to raise corporate value by listing four subsidiaries, and seeking M&As,” Kwon told Chosun Biz in a recent interview. 


Kwon Young-shik



Related:
Tencent going all-out for Chinese success of ‘Lineage II: Revolution’


Netmarble shares tumbled after its market debut on May 12, following a string of negative news concerning its megahit “Lineage 2: Revolution” and most recently, employee environment. User numbers have also declined amid government restrictions and the upcoming launch of “Lineage M” published by rival NCsoft.

Its share price closed 1.05 percent higher at 145,000 won (US$129) from the previous day on May 24 -- but 7.7 percent lower than the much-hyped IPO price of 157,000 won. Since May 12, the company’s market cap also shrank from 13 trillion won to 12.15 trillion won.

“Lineage 2: Revolution” is Netmarble’s record-breaking mobile role-playing game based on NCsoft’s “Lineage 2”. Just a month after its 2016 launch, the game raked in revenue of 206 billion won. However, the company’s daily sales fell from 7 billion won to 2 billion in May, according to a report by Samsung Securities. The decline comes as NCsoft is set to unveil “Lineage M,” the mobile version of the hugely popular “Lineage” released in 1997, in June.

Below are excerpts from the interview with Kwon.

Q. How will you fight the falling share price?

We are constantly thinking about enhancing shareholder value. First, we plan to list competitive and sustainable subsidiaries -- Netmarble N2, Netmarble Monster, Netmarble Nexus, and Netmarble Neo -- which have more development capabilities.

We have so far invested more than 500 billion won in its efforts to enhance development capability for mobile games. As a result, we are equipped with a good development environment and competitive edge that will allow us to thrive in the market.

Q. Are you considering any changes to your business strategies?

“There will be no major change in our plans to use the funds for R&D and M&As. Netmarble has already acquired Kabam, a US game company with the capability to develop high-end mobile games and SGN, which dominates the North American market and own ability to develop casual games. Our standards for an M&A are clear. For overseas, the goal is to acquire a company with nationwide dominance which has development capacity. For the domestic market, we will concentrate on existing development capabilities rather than expansion.

Q. Sales are going down for “Lineage 2: Revolution.” What’s the cause?

It’s called gaming fatigue. When we first developed “Revolution,” we thought users would play about three hours a day. However, heavy users have spent more than this amount of time, and as a result, some users have been stressed in the course of rapidly expanding their levels.

Also, there is communications restriction. Communication is a key element for massively multiplayer online role-playing games, due to the nature of mobile games. It was easier and more active for PC-based games. But for mobile games, communication is not as good because players use third-party channels. We have added a voice chat function and have made it easier to build a community. We will continue with such efforts.

Q. Your performance in China has not been great. Will collaboration with Tencent help?

“Everyone’s Marvel” and “Seven Knights” were released in China, and cumulative sales have reached 30 billion won.

However, considering the goal to become the top five there, the results are disappointing. We learned that domestic games should not enter the overseas market without localization. In the future, our games will be adjusted for each country.

For “Lineage 2 Revolution”, we are working with China’s Tencent to modify it for the Chinese market. Tencent is involved in some planning and will actively support marketing. We are expecting synergies between the two companies as Tencent is a stakeholder.

Q. Netmarble has been criticized for poor working conditions, such as long working hours. How do you respond to that?

Things are changing. We have announced measures for improvement, and now, most employees get off work on time. Of course, it may not be the case for everyone. For instance, if you have to update a game by tomorrow, it‘s difficult to leave the office on time. But recently, we are doing updates during the daytime. Some updates are done between 8 a.m. and 10 a.m. and it sometimes ends around lunch. Some users complain, but I think they will soon adapt. In addition, if you cannot get off on time, we give them vacations as compensation.

By Park Ga-young (gypark@heraldcorp.com)

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