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Majesco having financial problems.


Romier S
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This won't come as much of a shock, but both Psychonauts and Advent Rising were noted as being retail disappointments for Majesco. The companies CEO recently resigned which led to a sharp drop in thier share prices.

 

http://www.gamespot.com/news/2005/07/12/news_6128937.html

 

Shares of Majesco ended the day Tuesday up slightly to $6.89. But that didn't last. The company's stock plummeted in after-hours trading, falling more than 50 percent to $3.41 on news that the company had sharply downgraded its financial outlook for the year and that its chairman and CEO, Carl Yankowski, was resigning effective immediately.
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Majesco is now being sued by its own stockholders for overestimating finances. Thier stock closed at $3.42 today, an extreme low after thier 52 week high of $23.66. The former CEO of the company, Yankowsi, along with Chief Accounting Officer Jan E. Chasen are named as co-defendants. The suits claim that they both personally knew Majesco could not meet earnings forecasts if Psychonauts and Advent Rising fell short. You can read the full report here:

 

http://www.gamespot.com/news/2005/07/19/news_6129423.html

 

Wall Street's positive image of Majesco was reinforced in early June, when the company announced better-than-expected earnings for the fiscal quarter ending on April 30, 2005. The company's stock (NASDAQ: COOL) was riding high, hovering around $9 a share, and chairman CEO Carl Yankowski was talking up Majesco's fortunes. "We are entering the important second half of our fiscal year with confidence that we are well positioned to achieve our objectives for full year 2005," he said in a statement. "We remain focused on global growth, both organic and otherwise."

 

Just over a month later, Majesco had undergone an extreme reversal of fortune. On July 12, Yankowski abruptly quit after the company sharply downgraded its financial outlook for the year. Slow sales of Psychonauts and Advent Rising's commercial and critical failure had reduced Majesco's projections from annual net revenue of between $175 and $185 million to between $120 million and $125 million. Its estimated annual profit also fell steeply, going from $16 to $18 million in operating income to an operating loss of $16 to $19 million.

 

Majesco's stock took a drubbing as a result of the company's lowered estimates. In the 24 hours from the July 12 announcement, its share price fell 47 percent, at one point trading as low as $3.25 per share. Today, Majesco's stock closed at $3.42, well beneath its July 12 price of $6.89, and several atmospheres below its 52-week high of $23.66.

 

Unsurprisingly, Majesco stockholders are mad about the steep decline--mad enough to get litigious on the company that they partly own. This week, four class-action lawsuits have been filed against the publisher, with three filed today alone. The suits--handled by the firms of Chitwood Harley Harnes LLP, Brian M. Felgoise PC, Schatz & Nobel PC, and Weiss Bershad & Schulman LLP--all claim that Majesco executives overestimated earnings.

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The suits claim that they both personally knew Majesco could not meet earnings forecasts if Psychonauts and Advent Rising fell short.

 

No shit. Damn ambulance chasers. Products not selling as well as expected is part & parcel of development & investors should know that - Majesco expected them to sell well & got it wrong. They don't deserve to be hung over it - by all means withdraw your cash etc. Even the likes of EA get it wrong. Now, the allegations of product stuffing are a whole different matter.

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So who can I sue for knowing that if something doesn't sell as well as expected' date=' then the company behind it won't make as much profit as expected?

 

Doesn't this just state basic economic fact?[/quote']

 

No, it doesn't. There are specific things you can and cannot say to your shareholders. It may be that Majesco crossed the line somewhere in one of their filings or elsewhere.

 

I'm not saying that's what happened, because sometimes you can have a big shareholder or two sue because they have an axe to grind. IIRC, this is what happened with Iacocca and Kerkorian suing Chrysler a while ago.

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It's an axe to grind as far as I can tell on the issue of yearly targets. One of the lawsuits has language saying they knew if those two products failed, they wouldn't hit their yearly target. No shit!?!

 

As I said before, channel stuffing should be a seperate allegation.

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BTW, GameSpot, perhaps unsurprisingly, didn't characterize the complaints very well. Here's part of Chitwood Harley Harnes complaint's summary:

 

The Complaint alleges that throughout the Class Period, Defendants touted the diversification of Majesco?s product line and stated that the Company?s revenue and income would significantly increase in fiscal year 2005. Unbeknownst to investors, Majesco?s claimed increase in revenue and income was unreasonable because it would disproportionally depend on the success of just one of its video games, and on the Company?s continued improper accounting for development costs.

 

That's very different from saying that you weren't successful, so I'm suing. This is more like:

 

You told me "X" (certain profits), based on "Y" (certain statements and accounting procedures). It now turns out that "Y" itself is based on improper procedures. So I'm suing.

 

This complaint alleges that Majesco improperly capitalized development costs while claiming a diverse product line-up (in other words, concealing that it had put it's eggs in one basket). The thing is, just a brief scan of the entire complaint didn't tell me what, specifically, Majesco did with its accounting that was improper. A lot of stuff referred to looked like catch-all provisions. So I guess we'll see what turns up in discovery.

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Psychonauts should have been a $19.99 game. That may or may not have helped Majesco's situation but your average gamer isn't about to drop $50 on a game with Playstation One-ish graphics. It sucks to say but despite the good reviews and great dialog most people want cutting edge imagry.

 

It's a shame Advent Rising and Psychonauts didn't perform better. In retrospect I really appreciate Majesco for taking on each game -as they were both very big risks from a business perspective.

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...your average gamer isn't about to drop $50 on a game with Playstation One-ish graphics. It sucks to say but despite the good reviews and great dialog most people want cutting edge imagry.

 

I assume you're talking about Advent Rising here, because I can't believe you would say the same thing about the Psychonauts. I think the graphics in that game are one of its strongest qualities. :eh

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I assume you're talking about Advent Rising here, because I can't believe you would say the same thing about the Psychonauts. I think the graphics in that game are one of its strongest qualities.

Agreed. The assertion that Psychonauts is even remotely comparable to a Playstation One game in the visuals department is simply wrong (and bordering on ridiculous really). It's one of the rare games out there that happens to be both technically and artistically proficient.

 

I'm of the belief that if something like Destroy All Humans (a new IP) can sell 100k+ units despite not being "cutting edge", then Psychonauts should be able to do the same without needing normal maps or high dynamic range lighting. Of course Destroy All Humans presents yet another version of the GTA "sandbox" style gameplay that is all the rage these days. I'd say the higher sales of Destroy All Humans has little to do with it's graphics and more to do with the genre and subject matter (yay Anal Probes!). Hence why one new IP sees some level of success while another fails. It's not the end all answer to why a title fails, but I think Psychonauts just ended up feeling/looking a little too strange for people, so they didn't bother giving it a second look. Problems with the titles availability didn't exactly help either.

 

Psychonauts would have done better at 19.99. That I agree with Camp. Though it's ashame that a top level platformer with some of the best level design out there (and more) needs to be "bargain basement" for anyone to give it any attention.

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This sort of belongs here, as it may be related to Majesco's financial troubles. Nanostray, a scrolling shooter for the DS from Majesco, was supposed to come out Tuesday, but I can't find any stores that have it. Other people seem to be having the same problem, so it looks like your best bet right now is to roll the dice on Amazon or Gamestop.com and hope they aren't lying through their teeth about availability. IGN gave it an 8.0, so it's probably a good bet if you're a shooter fan or looking for something fun to play on your DS.

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While I totally agree that Psychonauts is stylistically a great looking game I don't know if we're talking about the same game when you tell me it's technically a great looking game. It's clearly not an up-to-date game in terms of what's being drawn on screen.

I like the game and appreciate it's style but the buying public sees this game as ugly.

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I don't know if we're talking about the same game when you tell me it's technically a great looking game.

I think you may be playing a different game indeed. The environments in Psychonauts are quite sizeable (damn huge in some instances with minimal loading times when moving from level to level), the texture quality in the game is generally quite good and detailed (even offering some nice water effects and some subdued bump mapping that is used quite effectively without being overdone). It also happens to run at a very smooth clip. You add in a fantastic artistic style on an already solid engine and you have what I consider an attractive game. Which is more than I can say for the other game mentioned here (Advent Rising) which was a technical mess, looked mediocre at best, and struggled to maintain its framerate for more than half of the experience.

 

I don't feel that technical proficiency necessarily needs to be defined by what "cutting edge" is at the moment. There are plenty of technically solid games out there that don't feature the level of detail that something like Half-Life 2 or Ninja Gaiden does. Nor do I feel Psychonauts even needs to try to achieve that considering the subject matter and the world the creators set out to make.

 

I like the game and appreciate it's style but the buying public sees this game as ugly.

The same buying public that bought 300,000+ copies of Madagascar?

 

Pic

Pic

Pic

 

Yeah, there's a game on the "cutting edge" of todays technology! Oh wait, there's a license attached there. ;)

 

Sorry but anyone that takes a look at these shots, or plays the game for a minimal amount of time...

 

Pic

Pic

Pic

 

..and tells me Psychonauts is "technically comparable" to a Playstation One game needs to get thier eyes checked immediately IMHO. Either that or they have never actually played a Playstation One game in thier lives.

 

If it's a dislike of the games art style we are talking about, or some perception of ugliness stemming from the the design of the characters or the world, then that is a bit more feasible to me. Liking the stylistic choices made to present the game are purely subjective of course. If that did not resonate with people, so be it. At the same time, this didn't stop Katamari Damacy from being a success for Namco and it's arguably one of the fugliest games sitting on store shelves today. ;)

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A few reports are coming in that Majesco has now declared chapter 11. You can read the full story here:

 

http://das-games.com/index.php?subaction=showfull&id=1122139589&archive=&start_from=&ucat=1&

 

and here:

 

http://www.cgno.com/news/889.html

 

Not sure whether these reports are accurate to be quite honest. Mention of Hip Interactive going bye bye have been reported on gameindustry.biz. You can read that below:

 

Hip Bankrupt

 

I wish we could get a bit more confirmation on the Majesco filing. I know they have a good array of titles coming and would hate to see those titles suddenly without a publisher.

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Right now, there is zero facts out there to back up that bankruptcy story other than the developers of Nanostorm bitching. Put it this way - I talked to someone at Majesco today & it was business as usual. I can see them reorganising after last week's news, but they have cash in the bank, no debt that I know of, and lots of income still - most of their revenue comes from things like GBA Video, the videogame plugin thingies (which has seen a downturn) & peripherals.

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Thank you Brian. That's exactly the type of information I was looking for and why I had a hard time taking any of this news as outright fact. It didn't make any sense really as it didn't seem as though Majesco was bleeding money or having much in the way of financial issues until the recent lawsuit and slow sales of Advent and Psychonauts.

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If anyone else is looking for Nanostray, check your local Toys R Us. A lot of people are having luck finding it there. I just bought a copy from the local one and cancelled my order from Gamestop. If any LCVG'ers still want a copy and can't find one, I can check if they have more left on Monday and ship them in the US or Canada for like $35.

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So can we knock this rumour on the head then?

 

CGN News - Correction- Majesco NOT Bankrupt After All

07.24.05 by Jonathan Law

 

We received information from a Majesco employee that Majesco itself was filing for Chapter 11 Bankruptcy Protection. It turns out they were only half right. Hip Interactive, a subsidary of Majesco, announced that it was filing for Chapter 11- not Majesco itself. Our source became confused by this, and mistakenly told us that Majesco itself was filing for bankruptcy, which is evidently not the case.

 

An email obtained from Ken Gold, the Vice-President of Marketing from Majesco Entertainment specifically states that the company is not bankrupt.

 

It was presumed correct, not only due to the employee, but the fact that Majesco has certainly seen better times financially. Earlier this week, Majesco disclosed to its shareholders that it was expecting a full-year loss. The CEO, Carl Yankowski, resigned amidst a flurry of share price drops, resulting in almost 50% of the price reducing.

 

CGNO apologizes to Majesco, and sincerely regrets the error for all of our loyal readers.

 

http://www.cgno.com/news/891.html

 

And when they're apologising, they're still getting facts wrong - Hip Interactive wasn't anything to do with Majesco as far as I'm aware.

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  • 5 months later...

The financial woes continue for Majesco, who only a short time after selling off the rights to Ghost Rider and The Darkness (being developed by Starbreeze, the good folks behind Chronicles of Riddick), have now apparently cancelled both Demonik for the Xbox 360 and the Taxi Driver game based on the classic De Niro film. The company will be moving back to publishing value titles and handheld releases in the future.

 

http://www.gamespot.com/news/6142618.html

 

http://www.gamecloud.com/article.php?article_id=3099

 

Things started to go south for the company when two of its highest profile summer titles, Psychonauts and Advent Rising, tanked at retail. Stock prices began to tumble, the company's CEO jumped ship, and stockholders sued the company on the basis that Majesco overestimated its earnings.

 

The final tally of the company's arduous year is a mere $59.7 million in revenue, down significantly from the $121 million the company earned in 2004. The end of 2005 was particularly rough for the company, as Majesco's fourth quarter yielded a mere $4.6 million in revenue, a drop in the bucket compared to the $45.3 million taken in the final quarter of 2004.

 

"This has been a difficult year for Majesco. We entered the premium console market with high expectation for success, but as a result of a variety of factors we were not able to meet our expectations," said Majesco president Jesse Sutton. "Recently, we evaluated our product portfolio and have sold or cancelled most of our premium console titles that were scheduled for release in 2006 and beyond."

 

It's ashame to see them reach such a low point, but I'll remain thankful for them having released Psychonauts, Guilty Gear on the Xbox, and especially Phantom Dust. All titles that I've really enjoyed over the years.

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Majesco laid off most of their in-house production staff earlier this month. Pretty much the only 'full blown' title they have left in development as far as I know is Jaws Unleashed, and that's been pushed back numerous times.

 

As for /them/ cancelling Demonik, that's funny.

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