Vivendi game-division revenues slump

Today, Vivendi Universal reported its quarterly earnings. Once again its game division, VU Games, has proven to be the global media conglomerate's sole money-losing division. While its music, movie, and telecommunications sections posted improved revenues, VU Games reported a loss through June 30 of 111 million euros ($136 million)--compared with a loss of 83 million euros ($102 million) over the same period in 2003.

Overall, Vivendi Universal saw its revenues and operating profit climb, suggesting that its executives have managed to turn the corporation's finances around. In documents released in Paris earlier, the media conglomerate reported a 6.6 percent increase in operating profit, spotlighting its Canal Plus pay-television and telecom businesses as its most profitable unit.

Profit for the quarter tallied 888 million euros ($1.08 billion), up from 833 million euros ($1.02 billion) a year ago. The company also made a change to its guidance, or forecast, based on the finances reported today. The company now sees a full-year adjusted net income of more than 1 billion euros ($1.26 billion) for the year. VU's reporting year ends December 30, 2004.

The company recently restructured VU Games' corporate suite, putting Bruce Hack in charge of the unit earlier this year. As part of his overall plan to upgrade the division's finances, some 350 employees were let go in June. The many delays to Half-Life 2 have certainly reduced the division's revenue--revenue that is necessary to shore up its listing finances.

In a statement, VU's CEO Jean-Rene Fourtou said the company is on the "right track," and that "the reorganization of Vivendi Universal is almost complete." Given that the game unit reportedly contributes a mere 1.6 percent to the company's bottom line, it can be assumed the ongoing re-org in Los Angeles will be given additional room to materialize.

The outlook of financial analyst Michael Pachter of Wedbush Morgan Securities suggests VU Games has a fighting chance to recover. "They have a decent library, good intellectual property, [and] good development," Patcher said. "Half-Life 2 should sell 3 to 4 million units the first few months, 2 to 3 million the next year. That will give them $200-300 million in receipts...I don't see them going under anytime soon."

Late-afternoon trading of Vivendi's American depository receipts on the New York Stock Exchange saw its price holding firm at $26.49, off just a penny in overall trading for the day.