Unity Software (U) -) shares moved firmly higher in pre-market trading following the surprise departure of CEO John Riccitiello following controversial price changes unveiled at the video game developer late last month. each.
Riccitiello, who has lead the group since 2014, announced his plan to retire "immediately" late Monday, with former IBM adviser and Red Hat James Whitehurst stepping in as interim boss, in the wake of fallout from a pricing change that triggered threats from key game developers to switch to a rival vendor.
Unity had said it would limit fees for developers for 4% of a game's revenues for those generating more than $1 million in sales, and suggested the new structure would apply retroactively,
However, the group also confirmed its third quarter earnings guidance, which calls for adjusted profits in the region of $95 million on revenues of around $545 million, suggesting management has arrested, for the time being, the impact of its pricing structure changes.
We have heard you. We apologize for the confusion and angst the runtime fee policy we announced on Tuesday caused. We are listening, talking to our team members, community, customers, and partners, and will be making changes to the policy. We will share an update in a couple of…
— Unity (@unity) September 17, 2023
“With the Company’s experienced leadership and passionate employees, I am confident that Unity is well-positioned to continue enhancing its platform, strengthening its community of customers, developers and partners, and focusing on its growth and profitability goals," Whitehurst said in a statement. "I look forward to working closely with the Board and our talented global team to execute on our strategy, and I anticipate a seamless transition.”
Unity Software share were marked 3.6% higher in early Tuesday trading to change hands at $30.75 each.
"With most of its customers losing trust in the company, particularly as it relates to management's decisions in recent years, this was likely the best decision for all parties," said D.A. Davidson analyst Franco Granda, who called a 'buy' rating with a $50 price target on the stock.
"With that said, we would be remiss to ignore the growth the company has experienced during Mr. Riccitiello's 9-year tenure at the company where it became one of the most broadly used development tools in the industry," Granda added. "He also led the company through two fundraising rounds and its IPO in 2020."
Unity will publish its third quarter earnings on November 9.
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