Tencent Holdings on Thursday said it would restrict its focus to its core business, while maintinaing cost-cutting and improving efficiencies, as it reported its first drop in annual revenue to date.
The world's largest video game company and operator of the
WeChat messaging platform posted revenue of CNY 554.55 billion yuan for 2022, down 1 percent from a year earlier,
after China's economic slowdown due to the pandemic and a long-running
regulatory crackdown dented profits.
Tencent Chair and CEO Pony Ma told reporters on a call the
company would focus this year on getting more out of existing core businesses,
rather than on "trying to do everything" and on operating in
"red ocean markets", where competition is intense.
"We hope that our entire business management team and
technology will be more focused," he said. "I think this is very
important because we can see that focus and making breakthroughs are very key
to overall development."
The business outlook is uncertain in the world's largest
gaming market after two years of regulatory crackdowns, but sector participants
are hopeful of a recovery as regulators have resumed granting publishing
licences since late last year after a months-long freeze.
Unlike in most other countries, video games need approval
from regulators before release in China.
The crackdown has changed the operating environment for
China's tech giants as regulators have tightened scrutiny over monopolistic
behaviour and companies' handling of user information.
Martin Lau, president of the company, told a later call with
analysts that regulations are being normalised and support for platform
companies should improve this year.
"[Chinese president Xi Jinping recently] mentioned
supporting platform companies to show competence, creating employment, driving
consumption and international competition," he said, "The premier
also highlighted the private sector would have a significant potential in the
China economy."
Advertising business picks up
Helping to offset the losses in domestic gaming and fintech,
Tencent's online advertising business showed a surprisingly strong recovery in
the fourth quarter, with revenue for the segment rising 15 percent, and
contributing to a 1 percent rise in the group's revenue overall for the quarter
ended December.
China's city lockdowns intensified in the weeks to early
December when the country abruptly ended its zero-COVID policy, unleashing a
wave of infections, which heavily disrupted the economy and caused many deaths.
Charlie Chai, an analyst with 86Research, said Tencent's
performance as a whole was "lukewarm", but the advertising segment
"shrugged off the COVID-19 challenge and delivered industry-beating
growth".
During the media call, Lau also spoke about the company's
forays into generative artificial intelligence, which has seen a surge in
global interest, driven by the popularity of Microsoft-backed startup OpenAI's
chatbot ChatGPT.
Reuters reported last month that Tencent was working on a
ChatGPT-like chatbot named the "HunyuanAide" that will incorporate
Tencent's Hunyuan AI model.
Lau said the company was rapidly advancing its proprietary
foundation model Hunyuan and planned to gradually roll out its own AI
foundation models.
Tencent's chief strategy officer James Mitchell said that
Tencent was ready to bear the large cost associated with training AI models
even though it is focused on cost-cutting in other areas.
The United States in October announced export controls on
high-end computer chips to China to try to contain AI development in the
country, but Mitchell said Tencent has enough chips ready to develop its AI
models. © Reuters
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