Majesco's Q1 Sees Slower Sales, Continued Declining LossesMajesco's Q1 Sees Slower Sales, Continued Declining Losses

Author: by Brandon Boyer, Jason Dobson

Publisher Majesco today announced the results for its 2007 first quarter, with sales down from $21.6 to $14.5 mil year over year due to its shift away from premium titles, but losses cut from $2.6 mil in 2006 to $926,000. For the three months ended January 31st, Majesco's sales were down $7.1 million from those in January of 2006, which the company attributed to its much discussed focus away from premium console titles to mass-market budget games. $9 million of the 2006 sales, the company said, came precisely from those higher priced games. To illustrate the point, company officials noted that in 99 percent of its first quarter results came from budget mass-market titles such as the DS' Cooking Mama, and only 1 percent from its legacy premium titles, compared to 18 and 82 the year prior, respectively. Though the company still remains in an operating loss, the total loss for Q1 2007 was $926,000, over half the $2.6 million in losses the company incurred in the first quarter of 2006. Said interim CEO Jesse Sutton in a statement, “As expected, due to our shift in strategy away from high cost premium games, the $14.5 million of net revenue we reported for the quarter was lower than 2006 first quarter net revenues of $21.6 million, which included sales of high cost premium games such as Aeon Flux, Psychonauts and Infected." Instead, the company focused on games such as Cooking Mama, Brain Boost: Beta Wave and Brain Boost: Gamma Wave, and touted strong enough sell-through of the PS2 version of its Jaws Unleashed to earn it a “Greatest Hits” designation from Sony Computer Entertainment America. "Going forward," he continued, "we will continue to execute on our mass market growth strategy with a focus on publishing quality, easy-to-play, affordable games that appeal to a broad audience." For the second quarter of 2007, Sutton said the company was looking forward to its first products for the Wii, including this week's release of Cooking Mama: Cook Off, and casual hit game Cake Mania for the DS. "Looking forward, we remain optimistic about the successes of both the Nintendo DS and Wii systems as their installed bases continue to grow," said Sutton, "and we will focus the majority of our game development efforts on these platforms.” Finally, the company gave its run-through for upcoming games to be released throughout 2007, including the aforementioned Cooking Mama: Cook Off and Cake Mania, as well as cartoonish Sudoku spinoff Toon-Doku, the Wii release of puzzle game Bust-A-Move Bash!, The New York Times Crosswords for the DS, and licensed titles Nancy Drew and the Deadly Secret of Olde World Park and Holly Hobbie & Friends. [UPDATE: Addressing questions during the investor conference call following Majesco's financial results, interim CEO Jesse Sutton was asked how Majesco planned to “draft behind Nintendo” in the next quarter and in general, as well as Majesco's outreach methods to consumers, to which the executive responded, “We'll place most of our promotion at the retail level...we find that of the nature of casual games that we have are more geared toward direct to consumer contact.” Continuing to look toward the Wii's potential, Majesco officials also commented that “there is absolutely an opportunity to move any titles that we have over from DS to Wii if we see to make a compelling game out of it.” John Gross, Majesco's executive vice president and chief financial officer, added to Majesco's appreciation for the Nintendo platforms, commenting that “the margins for both the Wii and DS are substantially higher than what our margins were on average last year, with the Wii being even stronger than the DS.” Gross also confirmed that the company was issued a notice on March 16 that the company is in danger of being delisted from the major U.S. NASDAQ stock exchange for not complying with the 10 consecutive business day $35 million market cap requirement, and thus is “conferring with council in terms of how to approach that.” Gross added that the company has been issued a 30 day period after which a plan will have to be presented to NASDAQ to avoid a delisting, though he commented that “at this point it's premature to say what the specifics of that plan would be.”]