Radica Moves To Profit, Settles Immersion Suit

Representatives from Hong Kong based peripheral maker Radica Games, maker of both toys and the Play TV line of all-in-one 'TV games' that includes Tetris, Street Fighter II, Space Invaders and EA Madden Football licenses, has announced details of the company’s first quarter financial results for the three months ended March 31st. During this period, the company swung into the black, reporting a profit of $0.5 million for the quarter, compared to a net loss of $1.1 million for the same time last year. Sales for the quarter increased by 85 percent to $22.5 million. The only sour note for the company was gross profit margin for Q1 2005 was 38.8% compared to 42.4% in Q1 2004, largely due to the impact of the sales of lower margin Play TV Legends products in Q1 2005. In addition, research and development costs were up from $0.9 million to $1.2 million due to costs related to the development of Play TV software. Also of particular interest - during the quarter, the company also "finalized discussions with Immersion" for use of its force feedback technology, a move that led to a settlement of past royalties and related legal costs in the quarter was $250,000. Immersion has recently been battling Sony over its controller vibration patent, and previously settled with Microsoft regarding the same patent. Radica's Chief Executive Officer, Pat Feely, particularly commented: "Our Play TV Legends line of retro plug and play games also performed well but only represented 13 percent of our sales for the quarter reflecting our lack of dependence on this category." Feely's de-emphasis of Play TV is likely due to the lower-margin nature of Play TV Legends sales, something that the poor company performance in the fourth quarter of 2004 was partly blamed on. In addition, some analysts are suggesting that the 'TV game' market may now be somewhat oversaturated, following the large initial success of companies such as JAKKS Pacific with its Atari 2600 unit.