FILE PHOTO: A staff member at a Tencent booth during an exhibition during the China Internet Conference in Beijing, China July 13, 2021. REUTERS/Tingshu Wang

By Josh Ye

HONG KONG, Feb 17 (Reuters) – Tencent Holdings is scrapping plans to dabble in virtual reality hardware as a bleak economic outlook prompted the Chinese tech giant to cut costs and staff at its metaverse unit, according to three sources familiar with the matter. .

The group, the world’s largest video game publisher, had ambitious plans to create virtual reality software and hardware in an “XR” or “extended reality” unit, which it launched last June and for which he hired nearly 300 people. .

He had envisioned a ring-shaped handheld game controller, but the difficulties of getting a quick return and the large investment required to manufacture a competitive product were some of the factors that led to this being abandoned. strategy, according to two of the sources. .

According to an internal forecast, the XR project will not be profitable before 2027.

The sources said Tencent had advised most of the unit’s staff to look for other opportunities, confirming an article published by Chinese technology news outlet 36Kr on Thursday.

The company also said on Thursday that it was not disbanding the XR unit.

The creation of this XR unit came amid growing global interest in the metaverse concept of virtual worlds, and marked a rare foray into hardware for Tencent, best known for its software, which includes a suite of games and of social networking applications.

It has also entered a race against its Western competitors, such as Meta Platforms and Microsoft, which are building their own metaverses and have their own VR hardware projects.

Last year was one of the toughest for Tencent since its inception in 1998. Its revenue was affected by regulatory measures and headwinds resulting from measures to curb the spread of COVID-19.

In a sign of these tensions, its founder, Pony Ma, displayed unusual frustration at an end-of-year meeting in December, during which she castigated managers for not working hard enough and said the company should focus on short videos. to grow in the future.

(Reporting by Josh Ye; Writing by Brenda Goh; Editing in Spanish by Flora Gómez)

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