Tencent announces massive restructure in light of decreasing market value

Johnny Cullen, Monday, October 1st, 2018 8:53 pm

For the first time in six years, Tencent is making a significant company restructure.

According to Reuters, Tencent will restructure three groups centered around content business into one consolidated group, as well as set up a technology committee to grow its R&D department plus foster collaboration and innovation.

The company said it will continue to “further explore the integration of social, content and technology that is more suitable for future trends, and promote the upgrade from consumer internet to industrial internet.”

It comes as Tencent has seen its market value fall after years and years of continued growth and success, only recently reporting its first quarterly profit fall since 2005. When the market closed on Friday in Hong Kong, shares were at HK$323.20, down from the HK$406 at the end of last year.

Matters are also hindered by China’s ongoing crackdown on online gaming and licences for newer games due for release in the country being put on hold, affecting the Tencent-owned, Steam-like Chinese-based service WeGame.

But how will this affect Tencent’s numerous operations in the games industry? Besides being the owner of League of Legends creator Riot Games, it also owns a majority share in Clash Royale developer Supercell and has minority stakes in – among others – Activision Blizzard, PlayerUnknown’s Battlegrounds company Bluehole Games, a forty percent stake in Fortnite developer Epic Games, and a five percent stake in Ubisoft that was made in part to kill off any potential takeover by Vivendi once and for all.

It is also the provider of WeChat, the biggest social media and messaging platform in China, which helps bolster its position against rival Alibaba. The consolidation of the three content business groups from Tencent, according to Reuters, will be seen as a way to improve corporate cloud-based data offering services.

Tencent may need to continue to diversify its investment portfolio outside of China, if the current government doesn’t relax its restrictions on game licenses. While western companies are optimistic about China chilling out with games, Tencent doesn’t have the luxury of playing the “wait and see” game. If it wants to keep a stranglehold on the Chinese game market, it will need to move quickly to staunch the bleed in its stock.

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