Gameloft shuts shop in Chengdu

Screenshot shows the poster for Asphalt 8: Airborne. [Photo/iTunes]

France-based game developer Gameloft SE has closed its office in Chengdu, Sichuan province, as part of its global restructuring plan and efforts to stay profitable.

The move comes close on the heels of the company pulling the plug on its Shenzhen unit in Guangdong province due to poor profitability and increasing market competition. The latest move is likely to see about 300 jobs being axed at the Chengdu office. Gameloft officials were not immediately available for comment.

The Chengdu branch mainly operated as a gaming development studio to produce mobile games available for download in Chinese app stores.

"Gameloft is planning to restructure its operations in China to initiate smart growth," said Yinan Wang, a business analyst at China Market Research Group.

"Henceforth, the company will have just one office in China, in Beijing, and operate it as a joint venture. Such a strategy will help Gameloft understand the Chinese market more closely."

The company in July confirmed that it had closed seven units in various international locations since the beginning of this year, as part of a cost reduction program to return to profitability.

The Paris-based company posted a net loss of 16.6 million euros ($18 million) during the first six months of the year, mainly due to weak performances in China and Japan.

"The first-half loss is due to the seasonality of our business as well as the disappointing level of revenues achieved by the three games developed by Gameloft specifically for the Japanese and Chinese markets," said Chief Executive Officer Michel Guillemot.

"China roughly represents 6 percent of Gameloft's total revenues," said Neil Shah, research director at market research firm Counterpoint Technology Market Research.

"So, it is not a significant dent to the overall performance if it temporarily downsizes operations in China and reworks a strategy to regain footing in terms of more attractive content and better partnerships in the mid-to long-term."

A change of strategy is needed since China's mobile gaming is expected to keep its rapid growth thanks to increasing spending power and the widespread use of smartphones and tablet devices.

However, increasing competition, the fragmentation of distribution channels and insufficient market research could continue to hurt companies like Gameloft.

Zeng Yanni in Chengdu contributed to this story.