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Tencent Announces Restructure Amid Chinese Regulation Woes

Chinese gaming giant Tencent will undergo its first restructuring in six years, it announced on Sunday. The move comes after a recent crackdown on online games by the Chinese government caused a drop in Tencent’s market value.

The company said in a statement it will consolidate three content business groups into one unit and create a new group for cloud and smart industries, according to Reuters. It will also set up a technology committee to help strengthen its research and development and it will “further explore the integration of social, content and technology that is more suitable for future trends, and promote the upgrade from consumer internet to industrial internet.”

Tencent’s net profit in the second quarter of fiscal 2018 dropped 22% compared to the first quarter, from RMB23.9 billion to RMB18.6 billion. While smartphone games revenue was up 19% in the second quarter year-on-year, it was down 19% compared to the first quarter of 2018. PC games, meanwhile, were down 5% year-on-year and down 8% compared to the first quarter.

Earlier this year, Chinese regulators ordered Tencent to halt sales of Capcom’s popular “Monster Hunter: World” on its WeGame platform after they received a large number of complaints about the game. Tencent had reportedly pre-sold over one million copies.

China’s State Administration of Radio and Television, which oversees the games market in that country, reportedly hasn’t given approval to any new game since the end of March. China’s Ministry of Education also recently called for limits on the number of new online games approved for distribution in the country. It believes increased gaming and internet use is causing higher rates of myopia in minors.

The regulation crackdowns reportedly soured investor sentiment toward Tencent, and other tech stocks in general.

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