Broderbund Software Inc warned Monday that it expects financial results for the third quarter ended May 31, 1998 Wall Street estimates. The, Novato, California entertainment software company said it expects to post third-quarter revenues of about $52m, and expects a net loss in the range of $2.5m to $3.3m, or $0.12 to $0.15 per share. The consensus estimate of analysts surveyed by First Call was for net income of $0.01 per share. The company said the disappointment was mainly due to higher-than-anticipated product returns and customer rebates. Broderbund also announced that it had retained the investment banking firm of Donaldson, Lufkin & Jenrette in order to explore strategic alternatives. The company would not comment any further on what those alternatives may be, only that it was exploring any and every opportunity and that the move was unrelated to the profit warning. Rumors have surfaced recently that the company is shopping itself around to potential buyers, the foremost name being Hasbro Interactive Inc (CI No 3,423). In April, Broderbund cut about 7% of its workforce and said it was looking to cut costs by about $5m a year and would be looking into more online gaming activities, as opposed to its traditional CD-ROM business. The product returns during the quarter came mostly from the Riven product, the highly-touted sequel to the best-selling game Myst. According to a spokesperson, the company’s channel partners were over-enthusiastic about the title and thus overstocked it. The spokesperson expressed the opinion that the resellers often fail to manage their inventory effectively and said that Broderbund itself had tried to convince them to stock fewer units. The company says it is confident about the ultimate sell-through of the product, but was disappointed by the issue of timing that left the quarter’s results in disarray. Riven had seen strong initial sales, moving one million units between its October release and March (CI No 3,363).
