Angry Birds Maker at Pivot Point

Updated April 3, 2013, 8:59 p.m. ET

Angry Birds Maker at Pivot Point


HELSINKI—Rovio Entertainment Ltd. continued to grow at a rapid clip last year, but a top executive said maintaining momentum hinges on how well it pivots from a hot Nordic game developer into a global entertainment powerhouse.

The Finnish company, which struck gold in 2009 with the launch of its Angry Birds mobile game, said Wednesday it doubled 2012 revenue compared with the prior year and posted a steep increase in net profit. Head count more than doubled to 518 staffers and its closely watched active-monthly-user count marched past the quarter billion mark.Still, Chief Financial Officer Herkko Soininen said in an email that Rovio needs to focus on new game launches and find success on a gambit of new entertainment initiatives, including a new cartoon series and a feature film planned for later in the decade.

“The rate of growth and profitability are dependent on the success of new games launches, our ability to maintain and strengthen the relationship we have with our fans and the speed and success of our new initiatives,” he said.

Mr. Soininen’s comments promise to be closely studied by potential investors waiting for Rovio to detail a plan for an initial public offering. In recent years, executives at the closely held company have expressed interest in an IPO—including statements made to The Wall Street Journal—but have given no indication of specific plans.

“At the moment, we have nothing new to tell on that front,” Mr. Soininen said.

Rovio posted a net profit of €55.5 million ($71.1 million) for 2012, representing a 57% increase compared with 2011. Revenue grew 101% to €152.2 million.

Mr. Soininen didn’t disclose Rovio’s liquidity position, but said “the company has a solid balance sheet with a healthy amount of cash and equity.”

Since the launch of Angry Birds, Rovio Chief Executive Mikael Hed has been focused on growing the company through an aggressive expansion in licensed merchandise—ranging from soda to children’s books to hooded sweatshirts—while also launching new game titles.

About 45% of Rovio’s revenue comes from the sale of licensed merchandise, up steeply from 2011.

On Wednesday, Mr. Hed said in a news release that the company’s 2012 earnings are a clear sign that his plan is paying off.

Analysts, however, wonder if the pace of growth, while impressive by most standards, is too sluggish for a frothy gaming industry where exponential sales increases are the norm.

“Last summer many people were expecting that Rovio’s revenue growth would be closer to 200%,” Tero Kuittinen, an analyst with Alekstra Inc., a mobile telecom market consultancy, said Wednesday. He noted that Rovio launched one new game in 2011 and reached 10-fold in sales growth, but in 2012 sent expectations “to the roof” by launching four new games.

While the pool of users is large, the expansion of the Angry Birds fan base has slowed. In March 2011, Rovio boasted 40 million monthly users, and the number shot up fivefold to 200 million by the end of that year. Over the course of 2012, however, the company had 263 million users

Mr. Kuittinen expressed concern that revenue growth may slow and profit margins may be slimmer than they would be for a pure gaming company, and that may severely dent the valuation in an IPO.

The analyst last year valued Rovio at $9 billion, but now says that if the company did an IPO next week, its valuation would be a maximum $2 billion, based on the most recent numbers. He expects Rovio to go public in more than a year.

IHS Screen Digest analyst Steve Bailey, however, said the company is making good progress.

“Rovio has succeeded in making Angry Birds more than just a spike, having held popularity for over three years in a fast-moving gaming landscape where high-growth sensations are common and make great headlines,” he said. “Longer-term consistency and sustainability remain a pressing concern.”

Last month, Rovio launched its own series of cartoons distributed through a variety of devices, including mobile phones and tablets. Rovio has signed a deal with media giant Comcast Corp. CMCSA -1.13% to create “Angry Birds Toons.”

The series marks the start of an ambitious but risky foray into the video-entertainment business. As Rovio expands into television and movies, it will be competing against an array of larger and more-experienced companies.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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