COPENHAGEN, DENMARK — In an announcement this week, Demant has revealed its strategic decision to gradually wind down its Gaming division while intensifying its commitment to the core sector of Enterprise Solutions under the EPOS brand within its Communications segment.
The decision follows a comprehensive evaluation of the potential for growth and competitiveness in the Gaming sector, following a period of less-than-anticipated outcomes attributable to unfavorable market circumstances and a deficiency in scale and critical mass.
The plan will involve a redirection of Demant’s resources and focus towards the Enterprise Solutions domain, which continues to demonstrate considerable long-term growth potential along with interlinkages with other components of the Group. Having established the headset division as a distinct business sector since 2020, this strategic move underscores Demant’s dedication to refining its operational trajectory.
“Subsequent to the separation from our joint venture with the Sennheiser group, the Gaming sector encountered a variable market landscape. After a period of extraordinary demand propelled by the pandemic in 2020, the gaming market has notably decelerated due to weakened consumer sentiment. Regrettably, we do not perceive a feasible path to attaining a profitable endeavor without substantial investments across products, branding, and distribution.”
–Søren Nielsen, President & CEO of Demant
Nielsen further expressed gratitude to the diligent workforce that worked hard to cultivate the Gaming sector. The phase-out process will be executed in a gradual manner, allowing EPOS to continue customer service and support while reducing the stock of existing products.
This winding-down process is predicted to conclude over the course of 2024.
Increased Focus on Enterprise Division
Image credit: EPOS
In Enterprise Solutions, EPOS will focus on solidifying its position in a number of target markets by further strengthening its product portfolio of premium audio and video solutions for enterprises and by expanding distribution partnerships.
The company plans to “carefully balance the need to improve short-term profitability against investments in future growth”.
“Overall, we continue to see attractive synergies with our Hearing Healthcare segment in terms of processing sounds in noisy environments. And with a sharpened focus on the enterprise market, which continues to enjoy high entry barriers, we are confident that our Communications segment will deliver attractive growth and returns over the medium to long term.”
The gradual wind-down may result in minor one-off costs in Communications in 2023, most of which will be non-cash, but there are no changes to the Group’s financial outlook for the year or in the medium to long term. In H1 2023, the Gaming business accounted for around 15% of the revenue generated in Communications.
In combination with previous cost-saving initiatives, Demant expects the gradual wind-down to lead to a reduction of OPEX in Communications to DKK 450 -500 million annually in 2024 due to reductions in the number of employees as well as to reduced sales, marketing and administrative spend in Gaming. Initially, the wind-down is expected to have a negative gross margin impact, but “once completed, it will support a gross margin improvement”.
Altogether, the wind-down of Gaming activities and sharpened focus on Enterprise Solutions aims to support Demant’s drive towards a less negative EBIT in Communications in 2024 compared to 2023, and it will help shorten the path back to profitability.
About Demant A/S
Demant is a world-leading hearing healthcare group that offers solutions and services to help people with hearing loss connect with the world around them. In every aspect, from hearing devices, hearing implants, diagnostics to audio and video solutions and hearing care all over the world, Demant is active and engaged. Our innovative technologies and know-how help improve people’s health and hear-ing. We create life-changing differences through hearing health.
Source: Demant
