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Nintendo released its third quarter earnings this week (PDF).  Unit sales over the holiday period were great but having to convert overseas purchases from foreign currency to Yen wasn’t.   Profits took a hit.  It was all largely as expected.   Same as the last quarter, mostly. There was one surprise.   Unexpectedly, the company made a million unit downward revision on Wii unit sales projections for the full fiscal year and other adjustments to software expectations (DS Hardware was revised upwards). 

The downward revision on the Wii ?  ….rewind…Holiday sales were record setting.  Just a few months ago, in October,  the company had upped sales projections for the year ending in March by a million units to 27.5m Wii units.   In August they’d increased forecasts as well. The growth was sufficient enough that it prompted the company’s president, Satoru Iwata to say in October it was “safe to say strong game demand is intact despite all the talk about the financial crisis.”

Now carving back the guidance to the prior number of 26.5 million units, even though a relatively small adjustment, begs the question of why.     

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UK gamer Eidos is starting off 2009 on one crazy rollercoaster ride.

Two weeks ago, following poor U.S. holiday sales for its much anticipated new Tomb Raider title, the company laid off 30 employees and trimmed its forecast. Full-year sales were reset to fall between £160m and £180m, down from previous estimates of between £180m and £200m.

Last week, the company’s shares jumped after a revelation an approach was made with a preliminary takeover offer. The company emphasized “that discussions are at a very early stage and that there can be no assurance that an offer will be forthcoming."  Still, with takeover rumors lingering for months, an official statement was enough to cause a boost in trading. (A survey of potential Eidos buyers and a detailed corporate history is available here)

Now it’s just the third week in January and Eidos is back to trimming staff again. Click to Read More

"Nobody loves you when you’re down and out….Everybody’s hustlin’ for a buck and a dime” sang John Lennon.  Sony and Microsoft may know exactly what he meant (at least with regard to how shareholders treat their stocks).  The two companies were the first to make big earnings announcements today.  The news from both was poor.  The lead storylines were cost savings and disappointments.   Breaking out the two announcements side by side:

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Much is relative.  Last week was bad for Circuit City;  on a comparative scale, not so much for gamer, Midway Games. Despite the crippling pressure of massive lingering debt potentially due ahead of its time, the company managed to do what the big retailer that’s sold their games couldn’t: buy more time.

Triggered by “change of control provisions” put into play when majority shareholder Sumner Redstone liquidated his position, Midway’s been facing down the prospect of Noteholder repurchase rights that, if exercised, could easily bankrupt the company.

At the end of December, Midway managed to reach a short term extension agreement with the holders of 7.125% convertible notes due in 2026.  Holders of Midway’s other class of notes (6% Notes due a year earlier) were holding out.

Thursday, January 15th, the 6% Noteholders also agreed to terms.  Click to Read More

The video game industry isn’t recession proof.  Weaker than expected results in August and September confirmed that.  Comments from NPD’s Michael Klotch at a game summit at SMU’s law school validated it further yesterday.  But, with the official 2008, and December, results now tallied – there’s plenty for companies to be happy with.  Growth hasn’t stopped, it’s simply slowed. It’s more measured,  but monthly, and annually, the results are still trending positively for the industry (even as some individual companies struggle). One out four dollars spent on entertainment in the U.S. goes to gaming, NPD’s Klotch says.

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Just in time for the New Year, Midway Games got a stay of execution.  SEC filings discovered this week indicate the company was able to extend its rapidly approaching debt redemption obligations in order to buy more time for renegotiation.

According to the filing, an agreement signed December 30th gives the company until February 19th before some of its noteholders can exercise redemption rights.

These rights stem from an early December transaction.   Sumner Redstone, the company’s majority shareholder at the time, liquidated his 87% stake for pennies on the dollar. His massive sale triggered clauses in the company’s debt agreements which provided redemption rights in the event of a material change in control. Subject to these rights, the noteholders can seek repayment of all outstanding principal.

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UK Gamemaker SCi Entertainment Group outbid Elevation Partners to acquire Eidos Interactive in 2005.  Less than two weeks ago, SCi filed papers to officially change their company name to Eidos – aligning the corporate name with their consumer face.  If ongoing trade rumors are any indication, however, there may be little need to rush out and print new letterhead.  Recent rumors have been circling that SCi/Eidos is on the block and the list of potential suitors includes EA, Ubisoft, Square Enix and Warner Brothers.  Other bigger game companies could be interested too.  Is there truth in the grapevine?

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