Sony Hit Hard in Economic Climate

It’s no secret that we’re living in a rough economic state right now, and no company is immune … not even a powerhouse like Sony. Recently, the company was forced to revise its financial forecast downwards from previous expectations. As a result, stockholders were informed that year-end payouts for their investments would have to be cut 35 percent, down to $0.13 per share from a previously expected $0.20 per share. Despite the news, shares in the company ended yesterday up slightly, trading at $20.20 per share.

Stockholders weren’t the only ones hit with bad news, though. Employees at Sony will also share in the burden of stopping the hemorrhage of losses from the company. The company announced that, starting next month, it will freeze its employees’ salaries for twelve months in an attempt to improve the company’s profitability. Bonuses for employees will also be lowered to four months’ pay, down from the expected six months, and annual compensation for managers will be dropped by anywhere from 10 to 20 percent through wage cuts and another 35 to 40 percent through bonus reductions.

All of these cuts come hot on the heels of Sony’s announcement at the first of the year that it expected major losses for the financial year, its first yearly loss in 14 years. With Sony pulling out all the stops to try and hold on to as much money as possible, maybe the company’s decision not to cut the PS3’s price point has a little more to do with pinching pennies than Sony Computer Entertainment America’s marketing VP, Peter Dille’s infamous “selling razor blades” theory.

Namco Buyout of D3 a Done Deal

Last month, we reported the news that Namco Bandai had plans to acquire D3 Publisher, and now it’s all but a done deal. Early this morning, D3 and Namco Bandai announced that the two companies have reached agreements which will give Namco Bandai a 95 percent stake in D3, with plans in place for the remaining 5 percent to be picked up in the immediate future. The total cost so far to Namco Bandai for the acquisition of the Puzzle Quest: Galactrix publisher? Just over $12.5 million.

Aside from the obvious benefits of picking up more than a handful of unique titles, such as Puzzle Quest, Dead Head Fred, and Onechanbara, Namco Bandai will also benefit from the acquisition of a bigger piece of the Naruto franchise’s pie in the states. Something just as important to Namco Bandai, though, might be the included acquisition of Vicious Cycle and its cross-platform Vicious Engine technology, which can be used in game development on nearly every platform under the sun, from the PS3 and 360 to the DS and PSP.

While there are still a few i’s left to dot and t’s left to cross, it looks like everything will continue to move forward with all companies involved in the acquisition, and no changes are expected in the development cycles of any games currently in the works from either D3 or Namco Bandai.

Sony Under Pressure to Cut PS3 Price

Okay, okay … so we know that the console wars will never end, and as long as there are video games, there will be people staunchly defending their console of choice. Still, in business, the bottom line is all about the numbers, and Sony is starting to feel the heat as its numbers continue to drop … at least as far as video game publishers are concerned. In an article on Bloomberg, Sony is being pressured to cut the price of the PlayStation 3 in an effort to build the consoles install base with consumers. The former leader of the console market has been hit hard with its current generation of hardware, with the PS3 consistently placing a solid third in sales behind the Wii and Xbox 360. Making matters worse, U.S. sales of the PS3 have steadily declined for three months straight.

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Take-Two Hit with $50M Q1 Losses

It looks like the 2009 fiscal year is getting off to a rough start for Take-Two. Addressing investors this week, the company posted its first quarter numbers and revealed that it has taken a loss of $50 million, up from the $38 million loss posted during the same period last year. Ironically, the company’s actual revenue was up for the quarter, up roughly 7 percent from $240.4 million last year to $256.8 million for this most recent quarter. The loss for the quarter in spite of higher revenue was blamed on the higher than expected costs related to “unusual legal matters” related mainly to the attempted takeover by Electronic Arts, business reorganization, marketing, and R&D costs.

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Activision CEO Looks to Future Success

Sometimes, as Mel Brooks once pointed out, “It’s good to be the king.” If you don’t believe Mr. Brooks, just ask Activision CEO Bobby Kotick. In an interview with Reuters news service this week, Kotick voiced his opinion expressing confidence both in Activision’s upcoming prospects, and in the overall strength of the video game industry, despite the beatings many businesses have taken in the current world economy. According to Kotick, “There’s probably more opportunity for our industry than just about any other industry I can think of other than maybe bankruptcy lawyers.”

In the interview, Kotick discussed Activision’s plans to use some of its $3 billion available funds to buy back stock from various third party shareholders, as well as expanding the company’s business through the acquisition of new IPs and development talents, as well as carving a niche for itself in the Europe and the Far East. Kotick told Reuters, “We’re just scratching the surface of opportunity as a publisher in Europe. There’s a lot more that we can do. In China and Korea, Blizzard has had great success but Activision products have not really had any success there.”

While discussing plans regarding Activision’s future, one place Kotick admits the company made a misstep was with Nintendo’s Wii console. Kotick stated that, “In the past we approached the Wii as an extension of what we were doing on PlayStation and the Xbox and I think we can do a better job of creating original content for the Wii, and I think you’ll see more of that this year.”

Circuit City Doors Close for Good

All good(?) things must come to an end, and this weekend marked the end of Circuit City. Since announcing back in January that the company was going belly up, Circuit City stores throughout the country started dumping their inventories, culminating in last weekend’s final sell off of all remaining merchandise. While the last couple of months have seen Circuit City inventory clearanced out at upwards of 80 percent off, some customers (as well as potential employees) held out hope tha there might still be some sort of last minute reprieve, similar to what happened when Tiger Direct parent company Systemax bought out CompUSA’s assets when that company went under. Sadly, there was no last minute stay of execution and the switch was finally thrown, leaving all 567 Circuit City stores as nothing more than a memory.

One interesting note about this story, though. While all of Circuit City’s retail stores throughout the US have been shut down, there may still be a glint of life left in the company. A message on the company’s website states, somewhat cryptically that, “CircuitCity.com is also temporarily closed, although we anticipate the website will reopen in the coming weeks. Please check back for updates.”

Have we really seen the last of the Circuit City brand, or will the name rise up from the ashes of liquidation in some new form, such as an online-only retail presence? Only time will tell.

Square Enix and Eidos Come to Buyout Terms

If you’ve been following the Square Enix buyout of Eidos like we have, you know that one of the terms put forth by Eidos shareholders has been that Square Enix had to submit a business plan for the purchase within 28 days from the initial offer back on February 12th. Today, both companies announced that Square Enix had not only submitted the plan well before the imposed deadline, but that the Eidos board of directors is supporting the arrangement, and recommending it to shareholders. With the plan of action submitted and now approved by the Eidos board, there doesn’t seem to be anything in place to stop the deal from going down.

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