Eidos predicts profitability despite short-term downturn
- Added:
- Feb 28, 2001
The results also showed a 9.3% fall in gross profit margins to 56.4%, from 62.2% the previous year.
The profit warning on its full year results issued by Eidos on 25 January attributed the slow down to the need to reschedule the rollout of titles originally planned for this financial year, due to Sony's PlayStation2 manufacturing difficulties, and Microsoft's postponement of a European launch of Xbox.
This problem has been experienced across the games industry: Rage and SCi Entertainment were also forced to announce increasing losses in the same week in January.
The setbacks in platform development have resulted in Eidos writing off 16.9m as the exceptional cost of returns of PlayStation2 games by consumers, against its revenues.
In its statement today, Eidos reiterated that its reliance on these new platforms for 2001 would continue to affect its trading over the next nine to twelve months.
Eidos has also incurred one-off expenses including 0.9m relating to legal and professional fees associated with the aborted takeover by Infogrammes, and through the write down of its express.com investment, totalling 36.2m.
However, Eidos has reduced its operating costs after inclusion of exceptional items from 97.5m for the comparable period in 1999 to 89.4m for the past nine months, and has cut its sales and marketing costs from 34m for the 1999 period to 29.8m for the previous nine months. This has been achieved in part by reduced expenditure on TV advertising in anticipation of lower sales volumes, said the statement.
Eidos has similarly reduced its R&D expenditure, focusing instead on using existing franchises across new platform. Product development has taken up 31.2m of investment in the last nine months, compared with 33.7m for the previous period.
Eidos' hopes for a return to “near term” profitability lie with its exertion of continued pressure on costs, said the statement, combined with the loyalty of consumers towards “familiar” titles and brands in the face of multiple launches of new platforms and methods of game play.