Acclaim Entertainment Inc is quitting the current cartridge video games business, taking a one-time exit charge of $51.2m. The charge in the fiscal second quarter ended February 29, saw revenue of $46.8m and a net loss of $55.8m for the period, or $ 1.12 loss per share, against $0.28 last time. We anticipated the 16-bit and portable games market would show greater resilience during Christmas and the first calendar quarter. That has simply turned out not to be the case, and full-priced software sales have declined nearly 40% in the first few months of 1996, said Robert Holmes, president of Acclaim. The one-time charge consists of write-offs and allowances for accounts receivable, inventories and prepaid royalties. Product categories affe cted by the exit strategy include software compatible with Nintendo Co Ltd’s Super Nintendo and Game Boy systems as well as Sega Enterprises Ltd’s Genesis, 32X and Game Gear products. The general industry move from 16-bit has been on the cards for a while. Last March CentreGold Plc issued a trading statement blaming a 23% decline in revenue on lean demand for 16-bit cartridges, saying at the time that larger firms such as Sega had suffered even greater losses. CentreGold’s statement on the hal f to January last year said revenue had dropped 23% to 41m British pounds, leading to a pre-tax loss of 3.6m pounds, 2.9m pounds of which came from stock provisions. Geoff Brown, Centregold’s chief executive, said his announcement was the visible tip of a much larger iceberg, claiming Sega dropped 2m units before Christmas 1994. Anything sold below 29.99 pounds was sold below cost, he said. However, in April this year, Sega chief Malcolm Miller told Computer Trade Weekly that he was still committed to developing the 16-bit system. One of the things we have decided to do this year, slightly different to last year, is come out with a number of strong [16-bit] titles. It was reported at the time that this may be a clever move to undermine Sony Corp’s successful PlayStation by recreating a low-end market for which Sony is unprepared. Or that by supplying high-grade games consoles across the world excludes those areas not rich enough to pay for 32-bit. Miller conceded that now that Master System was at an end, many territories are saying to us that they want a low price product, pointing particularly to Greece, Portugal and Eastern Europe. For these territories he would be pushing the MegaDrive.
