International

Tencent Restructures Amidst Market Value Drop

tencent-chinese-internet

Tencent Holdings revealed that it is restructuring for the first time in six years as it faces tougher Chinese internet regulation.

According to Reuters, the Chinese internet giant announced that Tencent executives will consolidate three content business groups to one unit and implement a new group for cloud and smart industries. In addition, the company will “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,” and will also create a technology committee to help bolster its research and development, as well as promote collaboration and innovation.

On Friday (Sept. 28), Tencent stocks in Hong Kong closed at HK$323.20 per share, compared with HK$406 at the end of the year.

While the company’s biggest money-maker is gaming, Chinese authorities have yet to approve in-game purchases for Tencent’s biggest game. As a result, last month the company saw its stock slide more than 3 percent in intraday trading to roughly 335 Hong Kong dollars, and its American depositary receipts (ADRs) slip more than 10 percent, on the heels of what Bloomberg termed “shockingly poor quarterly numbers,” marking the company’s first slide in profits in roughly a decade.

The Chinese government has been taking steps to tighten control over its internet sector, from mobile gaming to mobile payments, even as some of the biggest firms compete more fiercely with one another for eyeballs, wallet share and, of course, game play.

By the numbers, net income was down 2 percent year over year to 17.9 billion yuan, far below the 19.3 billion yuan that had been expected by the Street. As for the top line, revenues were up 30 percent — impressive as a stand-alone growth rate, but then again, the slowest pace in three years. The 73.7 billion logged in yuan for revenue was short of the 77.7 billion that the Street expected.

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