Eidos  (EID)

News
07/08/97 Eidos' auditors, Coopers & Lybrand, revealed that they would not be seeking re-election as the Company's auditors next year citing lapses in corporate governance regulation as being the principal reason for the decision. KPMG will be seeking to replace them.
COMMENT: The Coopers & Lybrand move should come as little surprise to those that have scrutinised Eidos' Report and Accounts over the last two years. Both years' corporate governance reports contained admissions by the Company of their failure to adhere to the Cadbury report. For the auditors it was clear that the situation was not improving going into FY98 although the Company has stated that it expects no problems with the FY98 report. The departure of Coopers and Lybrand, despite the speed with which Eidos enlisted the support of KPMG, does appear to reflect badly on the management, and in particular, the directors at the Company who are responsible for implementing the code. Eidos' problems will stem from: their rapid growth (principally by acquisition) over the last 2 years (they are now some 30 times their former size) investing in companies and licensing deals around the globe and, because of their US fund raising and NASDAQ listing, they must adhere to US GAAP regulations as well as UK regulations.

6/09/97 Two members of the Core development team responsible for Tomb Raider revealed that they are to leave the Company and set up a new development house under the publishing auspices of Interplay.
COMMENT: The loss of these two members is, as expected, being played down by Eidos. Given that the bulk of the 1997 turnover was from the sales of the game they designed and that the designers themselves received comparatively little by way of remuneration for its success, it was not much of a surprise that other publishers have been trying to tempt them away for the last 6 months or so. However, it should be noted that the Tomb Raider franchise as well as Core's mastery of that particular genre of game has already been established and that Tomb Raider II has now been completed.

23/09/97 Sony Computer Entertainment America has negotiated the console release of future Tomb Raider titles exclusively for Playstation.
COMMENT: Sony has only secured the video game rights to the Tomb Raider series, not the computer game rights to the title. What this effectively means is that the game(s) will not be published for any of Nintendo's or Sega's current or future consoles. This therefore allows the game to be published for the PC giving Eidos additional retail revenue as well as freedom to pursue ancillary PC revenue streams through bundling deals with OEMs.
In return, it is likely that Eidos will have received either a lump sum payment or a reduction in the royalty Sony would receive on each Playstation title published or a mixture of both. The value of this deal is not known at this time.
It is likely that Sony will attempt to seek further exclusives from Eidos and others and a likely first target would be Fighting Force if it proves successful.

06/11/97 Joint Venture with Opticom
COMMENT: Eidos have effectively acquired an exclusive licence for the use of Opticom's polymer storage technology in the games industry. The terms of the deal are that Eidos pay Opticom $5m for the rights and fund the venture themselves. The JV is only 50% owned by Eidos. The company are expected to make a decision on how the technology will be used by the end of January with a product launch within 18 months.
Traditional games storage media, CD, cartridge, Floppy drive and even DVD offer limited storage capabilities and access speeds compared to Opticom's technology whilst beating all of them on price. The JV will seek to create a new games storage device that could work with both video games and computer platforms. There are two hurdles to be overcome with this product:
-  Getting the technology to actually work. As has been mentioned elsewhere, the technology has been proven to work and verification has been done to validate this although no commercial products exist.
-  Devising a low-cost means of integrating the device with the computer/console. The Playstation offers limited means of expansion and little by way of data input connectors. At this stage is difficult to see how the Opticom technology could be used with it. For the N64, a cartridge slot exists that could be used although licensing issues with Nintendo would surely arise. PCMCIA cards offer the most convenient means of storing and integrating the technology in PCs but PCMCIA slots, whilst ubiquitous on laptops, are very rarely found on PCs. Serial ports offer a possible PC solution but are generally considered too slow for real-time multimedia streaming. It is likely that a solution will necessitate an entirely new interface and this could be expensive.
However, should the JV solve this latter problem, it is not difficult to see other games companies licensing this technology from them and this could turn into a considerable revenue earner for Eidos.
It is also possible that this could be the first commercial product derived from the Opticom technology despite the joint development agreement struck by Opticom with Lucent in October.

08/11/97 Eidos staff depart
COMMENT: 15 staff were made redundant and 3 projects were canceled.  It should, though, be seen as a natural part of games companies' continuous re-appraisal of the viability of titles in development and the teams developing them. It is important to realise that the games industry is a hits-driven business and although some titles have done well for Eidos, other such as Conquest Earth, Big Red Racing, Blood and Shadow Warrior have sold very poorly. The skill is as much in spotting potential winning ideas as identifying projects that are going sour. The resultant write-offs are commonplace and considered preferable to mounting costs and an unsaleable product. A further 8 staff were lost in Eidos Technologies reflecting the continuing difficulties that division has been experiencing.

25/11/97 Eidos Enters 5 Year deal with Mplayer
COMMENT: Eidos revealed that it has signed a long term deal with Mplayer, an Internet and dial-up technology based multiplayer games network. All multiplayer Eidos games will feature on Mplayer and Mplayer will also participate in the creation of a multiplayer information site for Eidos. The value of the deal is unknown but significant revenues from multiplayer games networks are generally not expected to start appearing for a few years.

28/11/97 Interim Results, Accounting Policy Change

COMMENT: The first half of the year (April to September) is traditionally the quietest time of the year and losses of around £10m had been projected. A couple of underperforming titles, Blood and Shadow Warrior were to blame for the difference based on the old accounting policy. That turnover has not grown significantly should not be seen as a sign of poor performance as the company is gearing up for a major assault on the Christmas market.
The policy change is similar to that made by SCi in September 1997 and represents a more prudent approach towards accounting for development costs whilst bringing the company in line with US accounting practices. From henceforth all internal development costs, development fees paid to third party developers and advanced royalties are no longer amortised and expensed over the life of the title when released but expensed as incurred. The net effect is to not only increase the costs incurred in 96 (witness the significant rise in LBT) but, because of the increased development activity this FY, also increase the costs incurred in the 97 figures. Theoretically, this leaves Eidos prone to uneven results but with continuous development and a busy release schedule the effects of this should be minimised. Expect to see a recalculated earnings estimate for FY98 soon.

28/11/97 New Releases: Championship Manager 2, Fighting Force and Tomb Raider 2
COMMENT: Three significant product launches took place in the last two weeks. Football management simulation, Championship Manager 2, became the fastest selling PC game in the UK during 1997 although its success should be tempered by the fact that it was released to retail at a reduced wholesale price and that its appeal outside of Europe will, understandably, be limited.
Fighting Force, a Playstation fighting game, has sold well particularly in the States where this genre of title has historically proven popular. Eidos are claiming that it is the most popular sell-in since Tomb Raider and the Company are still aiming for sales of over 1.5m.
Orders for PC and Playstation versions of Tomb Raider 2 are believed to have exceeded the 2m mark already despite the fact that it was only released today (11/08) in Europe and 7 days ago in the US. There is now little doubt that over the lifetime of the product Tomb Raider II will easily exceed sales achieved by the original.

05/12/97 Eidos acquires PC rights to Final Fantasy VII, plans to publish in mid-1998
Eidos has acquired the full European and North American publishing rights for the PC version of Final Fantasy VII. The game, developed originally by Japanese publisher Squaresoft for the Playstation, has sold nearly over 5 million units and is currently the best-selling Playstation game to date. However, the PC version will not sell in anywhere near the same quantity. The genre (Japanese RPG - role-playing game ) appeals far more to Japanese (where the majority of sales have taken place) than western tastes and previous games of this genre have failed to sell in large volume on the PC. However, if any Japanese RPG is going to break that trend, it is likely to be from the Final Fantasy series.

21/01/98 Stronger than expected sales across all territories
Eidos announced that its Q3 sales are expected to be higher than the company had expected, with in excess of 4 million units shipped. The principal factor behind this was Tomb Raider II (which accounted for around 2,250,000 units), although Championship Manager 2 (albeit at a reduced wholesale price) and Fighting Force both will have contributed significantly. The Company also mentioned that it expected the year end results to be "substantially" better than "current market expectations". By "current market expectations", they are referring to Kleinwort Benson's forecast of £8.9m PBT for the year ended March 1998. The latest consensus forecast stands at £13.5m.

26/02/98 Eidos announces record third quarter results
Eidos revealed its 3rd quarter results which showed a dramatic improvement on the corresponding quarter last year.

With operating margins increasing from 23% to 38% and PBT up by a factor of 4, Eidos are clearly benefiting from the upside effects of a AAA+ selling title (see The publisher business model explained). Of the 4 million units shipped during the quarter as estimated 2.4m are attributable to Tomb Raider II with the next biggest seller, Fighting Force achieving 600,000 units. Given that Tomb Raider II was only released on November 28th, there is likely to be considerably more to come, especially considering the longevity of Tomb Raider I (which has now passed the 3m sales mark). The importance of the Playstation and Europe to Eidos was underlined by the fact that 69% of Q3 turnover was derived from Playstation product and 57% derived from sales in European territories. The Playstation market is expected to continue to grow during the next year but the Company will be looking to increase it's North American presence (currently at 39%). The strong Q3 results put Eidos in a good position to improve upon their 1997 year end results which for the 9 months stand at t/o: £103.1m, PBT: £13m.
The company also revealed that Opticom, with whom Eidos have a JV to produce a games storage device, are at advanced stages of talks with 3 or 4 major entities but that the games device would not make an appearance until the next calendar year at the earliest.

06/03/98 Disposal of Simis
Eidos has agreed to let the wholly-owned simulation developer, Simis, buy itself out of the Company for an undisclosed amount. The developer, which employed 40 people, only had a single title, Terracide, published by Eidos (although it, unusually, was allowed to source deals with other publisher for products in development), which was not a great commercial success.

17/03/98 Eidos and Paramount plan Tomb Raider film
Following months of speculation, Eidos has confirmed that there is to be a Tomb Raider film made after all. Financial details of the deal were not revealed  but Larry Gordon and Lloyd levin, who were responsible for a string of action films such as Die Hard, Predator and 48 Hours, were named as producers for the project. Although films based on games have not fared too well to date (Mortal Kombat, Street Fighter and Mario Bros.), a large ($50m plus) development budget and Paramount's marketing expertise will certainly aid sales of any tie-in game released at the time (which Eidos are sure to do).

27/05/98 1998 Year end results
Eidos has enjoyed another successful year of high growth with prelims revealing that the Company's turnover had increased to £137.2m (an 82% increase over FY97) - see table. PBT was £17.6m (compared to an adjusted FY97 LBT of £6.3m) but EPS fell short of some estimates due to an exceptional £1.9m write-off (on disposal of Simis and Naked Records) and a hefty (£5.6m) tax charge. With cash at £42.5m and a market cap. of over £165m , the Company appears to be in excellent shape and could well become acquisitive again.
Much of Eidos' success during FY98 can be attributed to the continuing exploitation of the Tomb Raider brand and in particular to the launch of Tomb Raider II in November last year. Tomb Raider products now account for between 60-65% of the Company's turnover and with Tomb Raider III (due for release towards the end of calendar '98) and Tomb Raider IV (which will coincide with the Paramount-produced Tomb Raider film scheduled for Summer '99) in development, the Company cannot be accused of under-utilising the brand. Despite the apparent dependency on Tomb Raider, the Company does retain other successful titles which will be exploited such as Championship Manager and Fighting Force and number of potential original hits such as Daikatana and Ninja.

24/06/98 Eidos comments on business developments
Eidos' announcement that it is acquisitive at present could be seen as little more than an attempt to bolster their flagging share price. Eidos ' share price has, in the past, proven prone to spiraling - either upwards or downwards - and the announcement came after the price had fallen around 40% in less than a month. Under the current management, the Company has always been and remains highly acquisitive but whilst the Company has a strong cash position, its low current valuation seems likely to preclude them from any major stock acquisitions. The Company was, however, in talks earlier in the year with Viacom about the sale of its Virgin Interactive subsidiary and although Eidos has walked out of talks once, further negotiation cannot be ruled out. A more likely target is UK publisher Psygnosis which Sony, the current owners, have been trying to sell for a number of years.

03/09/98 First quarter results announced

Eidos were not expected to report a profitable quarter but managed to exceed most analysts' expectations in keeping losses during this traditionally quiet period to a reasonable level whilst considerably growing turnover. The 175% growth in sales was in part due to the success of the Company's Commandos PC title which has sold well over 250,000 units in Europe alone (and should at least double that with its US and ROW release) but the company also still benefits from strong Tomb Raider product sales. 
The Company announced that there had been a number of new product and corporate developments. The Company revealed that footballer Michael Owen had signed a multi-product, multi-year deal to have the Company's football games endorsed by the England star. This is an important move as the football games market has become increasingly brand-led as proven by US publishers EA who have achieved considerable sales despite poor reviews for a number of their FIFA Soccer titles. Eidos has also secured a publishing deal with highly-rated UK development start-up Mucky Foot but revealed that two key titles had slipped, with Daikatana now scheduled for January 1999 and Omikron moved into FY00.  The Company also announced some boardroom changes with the resignation of 2 non-execs and the FD and the appointment of 2 new non-execs and a new FD.

06/09/98 Eidos acquires Crystal Dynamics
Following the signing of a publishing agreement with the company in July this year, Eidos announced that it has entered into an agreement to acquire Crystal Dynamics, a US developer/publisher for £28.4m. The cash-only transaction will see half the amount paid on completion of the deal and half in April 1999. The Company has approximately £35m in cash resources at present so no further fund-raising should be necessary. Crystal Dynamics was founded in 1992, has around 100 employees  and retains a number of established brands and a respected internal development studio. The company will complement Eidos well with its strong pedigree of platform games (the Pandemonium and in particular Gex titles), an increasingly important genre (as the average age of gamers continues to fall) in which Eidos is currently underrepresented. In addition, Crystal Dynamics' publishing model, which involves self-funded development and marketing but not distribution -which is handled by partner publishers and distributors- means that little restructuring should have to take place to integrate the company into Eidos' operations. Although the company has been loss making for the last two years (with losses before tax of £1m on £7.6 turnover for FY98 and losses of £2.3m on £14.7m turnover in 1997), it is expected to contribute £25m to turnover, £15m to gross profit and £5m to operating profit for FY99. However Eidos will be taking exceptional goodwill charges totaling £30m over the next three years (in line with new UK goodwill accounting rules) which will impact the net earnings contribution.

28/11/98 Eidos announces strong revenue growth at interim stage

The interim results definitely appeared worse than many analysts had expected although it must be remembered that the first half of the Company's financial year is far less important than the second half which covers the Christmas period. The 118% climb in sales is very impressive and reflects, in particular, the greater-than-expected success of Commandos which has sold around 400,000 copies to date. Apart from the continuing success of Tomb Raider I, II and Gold editions the Company reported sales in excess of 350,000 units for Deathtrap Dungeon (PC and PSX) and Final Fantasy VII (PC) during the period.
Comparison of the results with last year should be done with caution as this year's figures are clouded with exceptional and other one-off costs and there was also a modification in accounting policy with regards advertising costs which did not result in restated 97 interim figures . The company decided to take a £5.3m charge on its Opticom  investment in order to erase the discrepancy in the balance sheet at the year-end when the value of Eidos' stake in the company fell below cost. Although the Opticom share price has in fact now recovered significantly the investment value will remain at this level (unless the value falls even lower) and would produce an enhanced exceptional gain should the stake be sold above the original cost. Further one-off costs of £1.6m were attributable to "acquisition investigation" in relation to Eidos' attempts to acquire Virgin Interactive and Psygnosis.

19/01/99 Stronger than expected sales across all territories
Mirroring an almost identical announcement this time last year (see 1998 news), Eidos announced that its Q3 sales (the three months to 31/12/98) were "substantially"  in excess of analyst's forecasts. Compared to 4m units sold during the FY98 Q3 period, the Company achieved 6m units this year although, again, much of this can be attributed to another successful Tomb Raider launch. Expect revised year-end forecasts soon.

19/02/99 Eidos signs up high-profile developer
Eidos has secured a three-product publishing deal with Elixir Studios a new start-up development company run by Demis Hassabis, one of the industry's most respected (and youngest) games design veterans. Hassabis was co-creator of Theme park (a 3.5m unit selling god sim published by EA) and co-founder of Peter Molyneux's Lionhead Studios. The deal, reported to be worth in excess of $6.6m, secures the first three titles from the UK company, the first of which is expected in 2000.

23/02/99 Eidos teams up with UK ISP Easynet to launch games network
Eidos has teamed up with listed UK ISP, Easynet, to set up a free internet access service called Eidosnet. Every Eidos game released in the UK will feature Eidosnet software which gives subscribers not only subscription-free internet access but also direct access to the MPlayer multiplayer games service. Eidos entered into a strategic partnership with MPath (the US company behind MPlayer) in 1998 to establish an Eidos multiplayer games service and Easynet will provide a low-latency link through to that service. Future plans include a roll out of the service across Europe. Although free internet access is not a new concept, Eidos will gain from: being able to add value to their single player and in particular multiplayer games; having the potential to build up a useful marketing database and being able to augment their understanding of the dynamics of the online gaming market. The agreement represents a further push into the online environment and follows an online sales and distribution agreement in the US with electronic software delivery company Digital River (on 22/02/99).

25/02/99 Third quarter results show continued growth

Fueled once again by a successful launch of the latest Tomb Raider iteration, Eidos revealed 64% growth in profit before tax and a 50% increase in turnover in the crucial three month run-in to the end of calendar 98. FY99 should prove to be a turning point for the Company with the successful establishment of a number of new games brands which will not only deflect criticism that the Company is a single product publisher but will form the foundation for more predictable repeat revenues. 7 titles (2 of which were Tomb Raider products) have so far this year achieved sales in excess of 350,000 and where brands are retained by Eidos (in all but one of these cases) these will spawn sequels. The final quarter of the year should see further significant growth too, with the release of a number of AAA titles: Championship Manager III, Akuji: The Heartless, GexIII and Official F1 Racing.

20/03/99 Eidos signs Goldeneye developers
Eidos have announced that it has signed up (in a 2 game publishing deal) another promising start-up development company, Free Radical Design. The developers, comprising of former members of the teams at Rare that created Goldeneye and its sequel, Perfect Dark, are aiming to have their first title, a PSX2 game, released during 2001. Goldeneye was published by Nintendo at the end of 1997 and achieved sales of 500,000 units in the UK alone. The game was very well received by the specialist press and won numerous industry awards and the sequel, which the team only partially worked on, appears destined for similar success.

13/05/99 Eidos collaborates with David Bowie on Omikron
David Bowie, his wife Iman, guitarist Reeves Gabrels and David Bowie's current band have all contributed towards Quantic Dreams' Omikron: the Nomad Soul, a title due to be published by Eidos during October.  Providing the soundtrack and characters in the title, Bowie and the band should at least add to the appeal of the title for Bowie fans. Although the use of prominent musicians for game music is not new, it is acknowledged that titles can be considerably enhanced (and thus have sales potential augmented) by the judicious use of well-known artists. The Company are budgeting for sales of 350,000 units of Omikron.

13/05/99 Eidos secures European distribution of Resident Evil III
Eidos have won the European (and Australian) publishing and distribution contract for Capcom's Resident Evil III, due to be released at the end of this calendar year. Beating off considerable competition from long-term Capcom partners Virgin Interactive, the Company will benefit in other ways from a relationship with one of Japan's strongest publishers. It will give the company the potential to use Capcom's established relationship with Japanese retailers to enhance sales of Eidos games in the Japan although such reciprocal distribution deals will be done on a title by title basis. The deal should add £2m-£3m to Eidos' bottom line assuming sales of 1.5m units in both territories. Resident Evil II achieved pan-European sales of around 1.1m at full price with a budget version likely to be released later this year (the budget version of Resident Evil managed around 450,000 units compared to 550,000 units at full price). The Resident Evil franchise (I, II and Directors Cut) is believed to have managed over 9m units worldwide.

13/05/99 Eidos locks up Thief franchise in multi-title deal
The Company has secured 4 new titles based on the 250,000 unit-selling PC game Thief. The first of the titles, which are being developed by USA-based Looking Glass Technologies, will be published in Autumn 1999 with the second due in Spring 2000. Eidos played a key role in the original title's success and the Thief brand should prove to be a valuable addition to the Company's ongoing strategy of building up sources of repeat revenue.

13/05/99 Eidos signs publishing deal with Michael Crichton games development company
The Company revealed that it has signed a long-term deal with Timeline Studios, a start-up games company that will create games based on the best-selling author's novels. This is an interesting deal for Eidos as Crichton, whose credits include Jurassic Park and ER, has had 100 million books sold worldwide and has been the creative force behind some of the highest grossing films and TV shows ever. Timeline's first title (due in 2000) has yet to be revealed so it is too early to gauge its sales potential. However, the Company has taken a "small" (amount not disclosed) stake in Timeline indicating the longer term hopes they have for this games development venture.

27/05/99 FY99 Year end results
With Pre-tax and goodwill profits up 154% and a 65% sales increase, Eidos exceeded most analysts' forecasts. Eidos ended the year with some £48m cash at hand and, in the context of a rapidly consolidating publishing market, the Company will likely use this to pursue the same sort of acquisition strategy as it demonstrated in the purchase of Crystal Dynamics. As mentioned earlier, Eidos continues to move away from dependency on a single title. Although the Tomb Raider franchise accounted for some 57% of revenues during FY99 this should decrease to between 30-40% during FY00 thanks to acquired repeat-revenue generating brands (Gex, Kain etc...) and the continuing development of its own brands (Championship Manager, Deathtrap Dungeon, Fighting Force, Commandos).  Indeed the line-up for FY00 is the most impressive yet with the Company reporting significant pre-orders for Legacy of Kain: Soul Reaver. The Company also stated that it should achieve a minimum 25% increase in revenues over FY99.

10/06/99 Eidos founder resigns
Eidos founder Stephen Streater has left the company he created 9 years ago, although this is, perhaps, not as major a blow as it might otherwise appear. Streater was behind the video codec company that formed the base from which the current current games giant grew and remained working in that division until his departure. His role within the games division was thought to have been minimal and a parting of ways has been on the cards for quite a while.

22/06/99 Tomb Raider IV Asia rights signed to Capcom
As anticipated in 13/05 news, Eidos have made its distribution deal for Capcom's Resident Evil III game reciprocal with the Japanese publisher picking up the rights to distribute the Playstation version of Tomb Raider IV in Japan and the rest of Asia. As mentioned in previous news, this appears an extremely prudent move by Eidos as it gives them access, via one of Japan's most successful publishers, to a considerably enhanced distribution and retail network.  

27/07/99 Eidos secure Olympic titles
Eidos have signed an agreement with former Eidos director Geoff Brown's International Sports Multimedia for the console and PC publishing rights to the next two Olympic games (Sydney 2000 and Athens 2004) and the 2002 Winter Olympics in Salt Lake City. The first of the exclusive rights, secured by ISM from the International Olympic Committee, is to be used for a PC and Playstation game, Sydney 2000, being developed by another Geoff Brown company, Attention to Detail. Although the rights are exclusive, this will not prevent other companies launching rival Olympic games-based products and whilst the name might give Eidos an edge much still depends on other factors such as the quality of the product, the distribution strategy and the timing of its launch.

30/07/99 Eidos buys 25% of Commandos developer and 75% of Spanish distributor
Eidos have spent approximately £14.5m (£17.5m with full contingency) cash to secure 25% of Pyro, the developers of Commandos and 75% of Proein, one the leading Spanish distributors. Although Eidos had previously stated that it does not intend to compete in the distribution market, the 25% stake in Pyro could only have been secured by buying 75% of Proein as the two companies share common ownership. Proein had previously been sole distributor of Eidos' products in Spain and will continue to distribute Eidos and other publishers' games. The real gem of the deal, Pyro, has certainly proven its worth with the hit title Commandos and the add-on, Commandos: Beyond the Call of Duty which have sold around 900,000 and 300,000 units respectively. The deal is in keeping with the Eidos policy of investing in (as opposed to buying) its most promising developers.  In doing so, the Company has secured publishing rights to the next three Pyro products (including Commandos II) and first-refusal rights on all subsequent titles. Both Proein and Pyro are profitable (FY98 PBT of £2.2m and £0.1m respectively) and the deal is expected to be earnings enhancing for Eidos' current financial year.

02/08/99 Eidos secures publishing rights to Enix and Capcom games
Eidos revealed that it has secured the Game Boy and Game Boy Color publishing rights to Enix's Dragon Warrior Monsters, the latest in the 20m unit+ selling Dragon Quest series. Dragon Warrior Monsters sold 2.2m Game Boy units in Japan alone (under the name Dragon Quest Monsters) and given the success of Nintendo's Pokemon in the UK, unit sales could be considerable in the West. Game Boy and Game Boy Color titles, though, are wholesaled at a much lower price than console titles and so the potential upside of this deal is more limited.
Eidos also revealed that it is to publish Capcom's Power Stone beat-em up title on Dreamcast in Europe and Australia. The title is due for launch along side the Dreamcast in September this year. Although there are advantages to launching early in a console's life (high software to hardware ratio and limited competition), Power Stone might struggle when competing products such as Namco's critically acclaimed Soul Calibur are released.

10/08/99 Eidos secured rights to Final Fantasy VIII
Eidos have secured the PC publishing rights to Final Fantasy VIII in Europe and Australia following the success of Final Fantasy VII, which Eidos also published, last year. Eidos continues to make inroads into the Japanese publishing industry and continues to take business away from other western publishers. Eidos have now secured the European publishing rights to some of the most successful Japanese franchises and, in the 22m unit+ selling Final Fantasy series, has a guaranteed seller. Eidos is estimated to have sold around 475,000 units of Final Fantasy VII on PC in Europe and Australia.

12/08/99 Eidos acquires 5% of Elixir Studios
Following its 3 title publishing deal announced in February, Eidos has displayed its confidence in the start-up games developer by acquiring 5% of the company for £600,000. Elixir is due to release its first product next year. Although Eidos has acquired majority interests in a number of developers its policy of taking minority investments in the more promising developers it works with should be seen as a prudent move. Developers and publishers tend to be valuable for two principal reasons: their skills and any brands they might have. Majority acquisitions of Crystal Dynamics and Proein were done to secure some key brands as well as key development talent. However, all to often, if a developer is acquired for its skills alone, the acquiring company can encounter motivation and management problems amongst the development staff. Indeed much of the proliferation of development companies in recent years can be put down to disenchantment with new owners/managers by staff at publisher-owned development companies. By merely minority investing in the developers, management problems are avoided, motivation is retained as are financial incentives that may have been cut back by an owner-publisher. The publisher retains the potential for a positive ROI and often secures a long term publishing contract as part of the deal.

03/09/99 Eidos announces Q1 results    

Eidos posted worse than expected results for its first quarter, but remained confident that it would meet analysts' year end expectations (see here). Eidos was always expected to produce weak-looking results due to the seasonality of its business but the problems were compounded this year due to the postponed release of two titles (Soul Reaver and Braveheart) that have fallen into the current quarter. If they had been released on time during Q1, Soul Reaver (PSX) with a day one ship-out of 750,000 and Braveheart with a day one ship out of 140,000 would have contributed over £15m to the Q1 results. As it stands they will now fall into the Q2 results and will be augmented by an anticipated 250,000 units of the PC version of Soul Reaver.
The Company also revealed that its convertible bond level has now fallen to $9.8m following conversion (of the debt into equity) and the remaining portion is expected to be cleared off the balance sheet in the coming months.

15/11/99 Eidos acquired stake in internet company, Maximum Holdings
Eidos has taken a 20% stake in USA-based Maximum Holdings for £34m in cash.  Maximum itself is about to merge with DVD Express, an online DVD and video vendor, after which Eidos will be diluted down to around 11.7% of the merged entity. The company is expected to float in 2000 with combined revenues of around $70m (the majority of which comes from DVD Express).
Maximum operates the GameFan network of games web sites and also owns a print magazine of the same name. Maximum boasts 3.5m unique visitors and a circulation of 300,000 per month for its web sites and magazine respectively. Based on recent market cap/unique user figures for comparable US-based internet content/community sites, this could prove to be a very shrewd investment as the price paid by Eidos represents as much as a 70% discount to the apparent current market rate. Aside from its potential as an investment, the deal gives Eidos access to a large community of games players and a DVD/movie-buying demographic that fits neatly into Eidos' core target market. Eidos intends to exploit this userbase through e-commerce and marketing agreements, exclusive promotions and content deals (eg first release of demos).

24/11/99 Eidos releases interim results

Eidos revealed lower sales and higher losses for the 6 months to the end of September 99 compared to 98 due to a smaller number of releases (5 Vs 7) over the corresponding period last year. In addition, development, marketing and admin costs increased and the Company incurred a £6m goodwill charge (£5m for Crystal Dynamics and £1m for Proein). Whilst this should not come as too much of a surprise to seasoned Eidos-watchers, it does leave the Company with a considerable hill to climb if it is to reach the £40m post good will operating profit level most analysts anticipate for the year-end. Fortunately the Company has its strongest-ever line-up for the second half of the year with Tomb Raider IV, Champ Man 99/00 and Resident Evil III amongst a range of potential AAA titles due for release during Q3 and Q4.
In addition, the Company revealed a number of new developments.
Eidos now own a controlling interest in developer Ion Storm (which it gained at no cost other than the initial publishing deal "investment" of two years earlier). The Company has increased its stake in comic company Top Cow Productions to 26% and has signed a highly promising licensing deal with Disney to develop games based on two recent (and one forthcoming) Disney properties. All three deals are interesting. Ion Storm has had a much publicised and very troubled first few years but Eidos, in securing a 51% stake in the developer for free, has not only brought the company into line but has gained a potentially lucrative investment. Top Cow has a number of successful comic characters which Eidos could exploit in games and the Disney property license gives Eidos access to a demographic (pre-teens and early teens) which it has yet to fully exploit.

18/01/00 Eidos issues profits warning
Eidos has been forced to announce a profits warning following a disappointing Christmas sales period in which a number of titles failed to materialise and some of those that made it failed to sell in the sorts of volume anticipated. Forecasts for the year-end have been halved as a result and forecasts for the next financial year have also been downgraded.
The video games market has entered the long expected transitionary period  as the old generation of video games platforms (ie PlayStation and N64) begin to be phased out and newer platforms are introduced into the market and begin to build up an installed base capable of sustaining AAA software sales (see History). In such conditions the market becomes even more hits-driven than it usually is, with a far higher proportion of non-AAA titles failing to make an impact. Few publishers release new franchises onto the declining platforms and AAA titles dominate to a far greater extent than normal. Indeed, it was only Eidos's two biggest AAA franchises, Tomb Raider and Championship Manager, that performed well shipping more than 3.5m units during the quarter (and breaking sales records along the way). Titles that received mediocre reviews (The Nomad Soul, Abomination, Urban Chaos, F1 Grand Prix and Fighting Force 2) underperformed. In addition, a number of other titles slipped to Q4 and others slipped to the next financial year.
We anticipate this market transition will take approximately 12-18 months and could in the mean time result in negative market growth. We anticipate the market begining to pick up again at the end of 2001 by which time new platforms from Nintendo and Microsoft will have been launched and the installed bases of Sony PlayStation 2 and Dreamcast will have grown substantially.
Key for Eidos in the short term will be the extent to which it can milk its existing brands (Tomb Raider, Soul Reaver, Commandos, Championship Manager and Gex) from this changing market. Key to the Company in the longer term will therefore be how well it can transfer these key titles onto these new platforms and the extent to which it can establish new brands on these platforms.

20/01/00 Eidos diversifies Tomb Raider onto Dreamcast
Following the expiration of Eidos' exclusive video games publishing agreement with Sony, the Tomb Raider franchise looks set to arrive on Sega's Dreamcast for the first time. The Tomb Raider series, which has generated over 20m unit sales in total, is also being diversified onto Nintendo's Game Boy Color as well. The larger than expected sales of Dreamcast (some 5m worldwide to date) will allow Eidos to maximise revenues from its key franchises. The Company now has 6 Dreamcast titles in development.

25/01/00 Eidos extends publishing agreement with Capcom
Eidos has announced that it has secured the European publishing rights to Resident Evil Survivor (PSX) and Resident Evil: Code Veronica (Dreamcast). Eidos, which published Resident Evil II and has the publishing rights to the delayed Resident Evil III, has further cemented its relationship with Japanese publisher Capcom (who handles Tomb Raider in Japan). Although margins on a co-publishing deal such as this are considerably smaller than for internally-developed titles, the Company can expect significant sales volume on what are already three of the most anticipated titles of the year. The Resident Evil series has achieved sales of over 14m units to date (from only 3 SKUs).

28/02/00 Eidos Q3 results

Eidos' results presented few surprises following the Company's profits warning in January. This reduced profit before tax (and goodwill) brings the year to date operating loss to £11m, a far cry from the £36.2m achieved in the equivalent period last year. We fully expect Eidos to have another profitable quarter and to turn the current loss-making position into a year-end profit. The Company has some key releases due for Q4 including Resident Evil 3 and Final Fantasy VIII and a number of other key titles due during the first half of FY01.

24/03/00 Eidos issues second profits warning and Opticom sell-off
Eidos has been forced to issue a further profits warning following a poor final quarter (Jan to March). The company attributed the same reasons for the previous profits warning (poor market conditions) to this latest decline in trading. As predicted at the time of the first profits warning, whilst the games market goes through a transitional phase - moving, in particular, from PlayStation 1 to PlayStation 2 - the market will suffer and we do not anticipate conditions picking up until the end of next year.
The timing of the Company's decision to sell its Opticom stake was fortunate as with £84m in the bank (pre-tax), there should be few doubts about the Company's ability to weather this 18 month storm, despite the repeat profits warning.

11/05/00 Eidos gains UK rights to Who Wants To Be A Millionaire
Eidos has gained the UK publishing rights to the interactive version of Who Wants To Be A Millionaire from its UK-based creators, Celador Productions. With a TV audience of over 19m in the UK alone and a game show format that lends itself neatly to an interactive version, the potential for the CD-ROM is considerable. The US version of the game show CD-ROM has proven to be one of the biggest selling PC titles of last year with well over 1.5m units sold to date - quite a feat considering that its was only launched in November 1999. Eidos has secured the rights to develop and publish the UK version of the game show and hopes to have the product out in Autumn on Playstation, Dreamcast and PC.

12/05/00 Eidos secures games rights to Chicken Run movie
Eidos has revealed that it has signed the worldwide rights to publish a PC and Playstation game based on the animated film, Chicken Run. The movie, which is due out in the summer, is being produced by animation company, Aardman Animations. Aardman has received 7 Oscar nominations for its comedy animations such as Creature Comforts and The Wrong Trousers. Unusually, the game rights were secured by a games developer, Blitz Games, who selected Eidos to act as publisher (as opposed to the other way round as evidenced with Who Wants To Be A Millionaire).  The game will be released later this year.

13/06/00 Eidos reveal 4th quarter and year-end results
Eidos's year-end results were in line with expectations (see news above), with the company revealing the extent to which its decline in trading has taken place. The Company revealed a 14% drop in turnover to £194.8m for the year ended 31/03/00 and an operating loss of £27.3m down from an operating profit of £39.2m in FY99.  Eidos' FY00 figures are complicated principally by the £80.2m net gain from the disposal of 77% of its stake in Opticom but also by the resultant tax charge increase (from £13.7m to £24.1m) and the increased goodwill "charge" (from £4.1m to £13.4). Including all these non-trading elements leaves the Company with FY00 EPS of 25.9p (PAT of £25.2m). Stripping out the goodwill and Opticom disposal gain, however, the EPS is reduced to -42.8p.
Despite the £80m one-off investment gain, the Company currently has only £22.3m in cash, a figure which it maintains will be sufficient to keep the company running at optimum level during this transition period for the industry. The Company still has 23% of its original Opticom investment left, should it need to raise more funds without resorting to an equity or debt-based fund-raising and a number of other investment assets.
At a trading level, the Company managed to achieve 350,000+ unit sales on 9 titles (four of which were Tomb Raider titles) out of a total of 24 released during the year. FY01 sees the release of a number of new brands such as Deus Ex, Hitman, Timesplitters and Daikatana, new licenses such as Who Wants To Be A Millionaire, Chicken Run and three games based on Disney properties, as well as further iterations of its established franchises, Tomb Raider, Commandos and Championship Manager. Irrespective of the relative merits of these titles, though, the Company will continue to be affected by the transitional market conditions and we stand by our projection that the market will not resume strong growth til the end of calendar 2001. In these conditions it is the strongest brands that fare best and although Eidos intend to launch a number of new brands it does have a broad portfolio of established brands to fall back on and that is something few competing publishers can boast.

20/06/00 Eidos begins sale talks
Eidos has revealed that it has entered preliminary discussions to sell the Company. It did not expand on this statement although it is reasonable to assume that it is another games publisher that is looking to buy it as they stand to gain most from a games business and the publisher market has been consolidating rapidly. Likely acquirers are numerous although a high cash % bid might be preferable for senior management looking to exit cleanly. If that is the case, the list could be topped by Havas (who are looking for increased European development and console presence), Microsoft (who need big-hitting content for X-Box) and Infogrames (a highly acquisitive publisher which has just raised £230m). Other acquirers might come from the US or Japan.
What is perhaps more interesting is the question why are they putting themselves up for sale. The Company appears to have adequate cash resources, a strong line-up of products, some well-established brands and some widely-envied partnerships. It seems, therefore, that the decision is being taken because the senior management are simply fed up with the share performance of the company and its resulting restrictions on growth, much as had happened at Gremlin. Because of its tangible and intangible asset base, there could be fierce competition for the Company and that can only be good news for current shareholders.

31/08/00 First Quarter FY2001 Results Announced
Eidos' first quarter resulted closely mirrored the results achieved in the equivalent period in FY2000 and reflected the continuing transitional market conditions (see13/06/00 news).