Bear Stearns Downgrades NCSoft Stock

Analyst firm Bear Stearns has officially downgraded Korean headquartered MMO company's NCSoft's stock from Outperform to Peer Perform, citing the apparent poor performance of Auto Assault and concern over launch windows for upcoming games such as Tabula Rasa. According to the analyst's comments: "We believe the cumulative effects of Auto Assault's recent failure and the lack of near-term catalysts may displace investor appetite for risk and continue to weigh on the stock, perhaps through 4Q06." NCSoft may dispute the description of PC MMO Auto Assault's launch as a failure, and did dispute recent reports, accompanying the official announcement of 70 layoffs at its U.S. office, of subscriber numbers under 10,000 for the car combat-based online title. However, a recent server merge for the MMO, relatively soon after launch, certainly shows the title may not be performing to expectations. In addition, Bear Stearns representatives commented that the 2007 titles are 'key catalysts', suggesting: "While we are comfortable with the solid Guild Wars franchise maintaining revenues as older games gradually decline, we believe that successful launches of highly anticipated Aion and Tabula Rasa in 1H07 are crucial to earnings growth... we estimate earnings to hit an inflection point in 2Q07 from these new titles." The timeliness of the Richard Garriott-headed Tabula Rasa is a particular worry for the analysts, with a GDC 2006 talk by Garriott admitting that "...in the Fall of 2004, Destination Games started over [in developing the game]." Bear Stearns comments: "We note that Tabula Rasa has undergone several revamped efforts over the past two years. Many had previously expected the game to launch in 2H06." They conclude: "We believe our 2007 estimates are exposed to extended launch delays, and we seek greater confidence in the timing of game releases, which may come by the end of 3Q06." As for Tabula Rasa, at E3 2006, producer Starr Long commented to GameSpot that the game will be "done when it's done", and an official release date is yet to be revealed for the title, hence analyst concerns of what leading games might prop up NCSoft revenues in the interim.