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Japan's DeNA says on track for overseas profit in fourth quarter

Japanese gaming firm DeNA Co's "Mobage" - a Japanese-style contraction of "mobile games" is pictured in front of the company's logo in Tokyo
Japanese gaming firm DeNA Co's "Mobage" - a Japanese-style contraction of "mobile games" is pictured in front of the company's logo in Tokyo

By Mari Saito

TOKYO (Reuters) - Two years after shifting its focus abroad and millions of dollars in aggressive acquisitions later, Japanese gaming firm DeNA Co Ltd says it's on the verge of turning its first profit in its overseas operations, the company's president told Reuters on Thursday.

DeNA's Mobage platform - a Japanese-style contraction of "mobile games" - has more than 45 million members in Japan and the decade-old firm has a market capitalization of $5.4 billion as of Wednesday, nearly double that of embattled Japanese TV maker Sharp Corp.

Isao Moriyasu, who took the reins of the firm last June after the sudden departure of his predecessor, said the gaming firm is on track to generate $60 million from in-game currency abroad this quarter, double the amount logged in the July-September period.

Such in-game sales, called "Moba-Coin" on DeNA's platform, consists of revenue for both third-party developers and in-house games. But the firm's overseas sales is small change compared to DeNA's numbers in Japan.

"What we're aiming for is to turn a profit in the fourth quarter and we're on our way to that, but I don't believe it is going to be easy at all," said Moriyasu, speaking at the company's new headquarters in the fashionable Shibuya district.

The company said in-game sales in Japan reached 56.2 billion yen ($677.7 million) in the July to September quarter this year.

"We are launching new titles like 'Transformers' and have already launched 'HellFire' in the United States and we are also developing high-end first person shooter games," said the soft-spoken executive. DeNA sealed a three-year agreement with U.S.-based Hasbro Inc in July to jointly develop smartphone games based on the company's Transformers franchise.

The 39-year-old executive, a graduate of University of Tokyo's Aeronautics and Astronautics program and a former systems engineer, said it was important to develop hits like "Rage of Bahamut" and "Blood Brothers", which have topped Apple Inc's App Store and Google Play in the United States and attract new users to the company's platform.

DeNA, along with domestic rival Gree Inc, have been big spenders abroad, starting with its $400 million acquisition of San Francisco-based developer Ngmoco in 2010.

"M&A remains an important channel to expand and as we expect the overall market to continue its growth. We are always interested in businesses that can complement our business," Moriyasu said.

That includes game developers, payment system providers and advertising networks for apps in the United States, China, South Korea and Japan, he said.

Moriyasu also did not rule out future listing in the United States of the company's shares.

JAPAN TO AMERICA

Japanese gamers' strong appetite for in-game purchases drove strong profits and stock rallies for both DeNA and Gree. But a regulatory crackdown this year on "complete gacha," a mechanism used in card games in which users turned over a predetermined set of virtual cards in order to get a rare prize-winning card, forced Japanese game makers to halt the games.

Regulatory concerns and a maturing market at home have accelerated Japanese firms' move abroad and investors say DeNA's overseas strategy looks to be finally gaining traction.

Since May, when shares of both Gree and DeNA tanked after regulatory concerns first emerged, DeNA shares have rallied 80 percent, partly boosted by the company's strong results, while Gree recovered just 13.9 percent over the same period.

DeNA posted an operating profit of 63.4 billion yen ($769.5 million) for the year that ended March, up 13 percent from the previous year. For the latest July to September quarter, the company reported an operating profit of 20.4 billion yen, up 38 percent from the same period last year.

The company does not publish its annual sales or profit outlook.

In the United States, Japanese companies as well as Korean game maker Nexon are upending the U.S. market with innovative in-game currency and monetization methods and challenging established firms like Zynga Inc.

In Japan, DeNA signed a business alliance with ailing social network operator Mixi Inc, a domestic precursor to Facebook Inc, to share the same game platform.

The move reignited speculation that DeNA and Gree could be interested in acquiring the social networking service from its founder. Moriyasu said he is not considering a capital tie-up with Mixi.

($1 = 82.3900 Japanese yen)

(Additional reporting by Reiji Murai; Editing by Matt Driskill)

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