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Angry Birds maker dragged out of silence after stock is sold off

Angry Birds products are displayed during a news conference in Hong Kong in this file photo.

© Bobby Yip / Reuters

The company behind the Angry Birds game is struggling to stop investors walking out.

Rovio Entertainment Oyj interrupted a "silent period" on Thursday to tell shareholders that 2018 will be far worse for the Finnish company than initially thought. After issuing a short statement, it then went quiet again, promising more information in connection with its annual results on March 2.

But as the profit warning wiped off half its market value, leaving it worth just over $500-million, management decided to break its silent period again, and convene an ad hoc conference call.

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Chief Executive Officer Kati Levoranta, who led Rovio through its initial public offering in September, said it was the intense selloff that forced her into dialogue with the market.

"Having seen how strongly the stock market had reacted to our preliminary information, and especially, as we assume, the outlook for 2018, it was prudent to change the original approach and have a dialogue with investors and analysts already today," she said.

Her decision followed investor criticism. Carl Armfelt, a portfolio manager at Swedbank Robur Fonder AB, said Rovio has "been bad at communicating since its IPO," according to Dagens Industri.

Tero Kuittinen, who has analyzed the mobile games industry for nearly two decades and now advises Rovio's competitor Next Games Oyj, says the company is deliberately leaving the market in the dark on some key pieces of information.

"Rovio is a rare case in that it has clearly decided not to guide analysts on some basics -- such as the volatility in the licensing business or user acquisition costs," he said. "When the results then come in outside of the estimates range, it causes a strong reaction. This is of course why most of the companies attempt to manage analyst models to some extent."

Investors are desperate for proof that Rovio isn't a one-product wonder, and that it can repeat its Angry Birds success. So far, the company is burning through its cash to bring more users on board, but revenue from its main products is tumbling.

"They've had to own up to the fact that they're having to buy revenue with expensive marketing spend," said Aaron Kaartinen, an analyst at asset manager FIM. "The games have to have genuine pull and at the moment, they just don't really have such games."

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Kaartinen says Rovio has "positive Ebit, so they're not in a crisis."

"They may have thought that the well-known name helps get users to play the games, but this doesn't seem to be the case," he said. The game just has to be so good to bring in the big bucks."

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