Square Enix Reportedly Looking To "Sell Its Stakes" In Its Studios To Focus On Japanese Games

A few months ago, Square Enix sold off Eidos, Crystal Dynamics, and Square Enix Montreal to Embracer Group for what seemed like a pittance. These were profitable studios that had previously made critically acclaimed titles like Tomb Raider and Deux Ex, and there was every possibility that they were going to do it again.

Earlier today, Square Enix discussed the sale during a conference call for its latest financial results. Analyst David Gibson sat in on the call and provided a summary on Twitter (via VGC) that was pretty eye-opening.

It turns out that Square Enix wasn't necessarily concerned about the profitability of the studios themselves, but more concerned about games like Tomb Raider and Deus Ex taking away from the financial performance of Square Enix's other brands.

"Crystal Dynamics/Eidos sale was driven by concerns that the titles cannibalized sales of the rest of the group and so it could improve capital efficiency," wrote Gibson, adding that the sale was just phase one of Square Enix's master plan. Phase two will involve "diversification of studio capital structure," which will start with a review of its studio portfolio. This could result in yet more studios being either partially or wholly sold, with Square Enix expecting the biggest impact to be on its European and US studios. Square Enix then plans to re-allocated resources to focus on its Japanese titles.

Gibson also offered his own expert opinion on Square Enix's plan. He found it interesting that it planned to sell studios while Sony, Tencent, Nexon, and more are all looking to buy. He also found it interesting that after the sale of Crystal Dynamics and Eidos, Square Enix has $1.4 billion in cash and no debt, which makes it strange why the publisher is looking to divest itself of profitable studios.

"Extraordinary decision by management," wrote Gibson. "Stock price likes it in the short term (+9% today) but longer term…"

Square Enix also mentioned its plan to "establish new studios" and possibly even make acquisitions as it’s shedding its overseas operations. This could mean Square Enix is looking to purchase more Japanese studios, or it might just be trying to make itself look good before putting itself on sale to a larger Japanese company.

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