Vivendi Universal has decided to float its computer games division, VU Games.

Troubled French conglomerate Vivendi Universal has promised its shareholders to raise E12 billion to reimburse its massive debts. But although Jean-Rene Fourtou, the new CEO, hinted at a sale of the company’s games business a few weeks ago, Vivendi has now changed its plans. VU Games should float on the Nasdaq early in 2003.

This decision is sound as VU Games operates in a market that is growing strongly. Already, there are signs that the coming Christmas period will break sales records. Furthermore, VU Games is a leading player: its PC games business is thriving and it is successfully building its presence in the lucrative console market, which drives the industry.

As if to underline Vivendi Universal’s new gaming strategy, VU Games has also said that it will acquire Sweden’s Massive Entertainment, through its NDA Productions studios. Besides publishing games for the PC such as Ground Control, Massive Entertainment is also active in wireless gaming.

Both announcements bring a closure to the months of doubts regarding the fate of VU Games. It gives the division clear strategic directions: expansion and growth. The decision not to float in France is also prudent, considering the current hostility among French investors to games stocks – especially after the recent announcement from Infogrames that it will cut a large part of its staff based in France.

However, challenges remain ahead. When VU Games was just a branch of Vivendi Universal, its private status used to give the publisher more liberties regarding production deadlines and expectations. As a public company, VU Games will have added pressure from shareholders to perform according to corporate forecasts – and even if it has a strong games portfolio full of valuable franchises, it will still be vulnerable to production delays and potential sales failures.

Related research: Datamonitor, Global Electronic Games (DMTC0833)

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