Handheld electronic game manufacturer Radica Games
Radica has gone retro, targeting consumers for whom gaming is not an all-consuming passion. While its handhelds do not quite harken back to the era of Pong, there is a simplicity to their TV games, such as its deal with Sega to bring back Sonic the Hedgehog, Street Fighter, and other Genesis game console games. It's part of the company's strategy to tune in to middle-aged gamers who fondly recall the games of their youth. I can still easily pick up a retro football game -- like the one manufactured by Mattel
That fondness, though, fell short of expectations of the analyst who seemingly has been unable to accurately call Radica's performance. Where he expected earnings of $0.23 a share on $50 million of revenue for the quarter, the company produced earnings of $0.18 per share on revenues of $45.7 million. That was a 100% increase in profits from last year, but only a 5% increase in sales.
Why the disparity? Video game accessories had a precipitous decline, falling 55% year over year. Radica's other segments, including youth games and manufacturing services, all experienced declines. It was only the electronic games segment that continued to shine for Radica, growing sales 24% in the fourth quarter and 56% on the year. Some of the quarter's sluggishness was laid at the feet of the big name console makers like Microsoft
Radica is still enjoying success from its "20Q" TV game, an electronic version of 20 questions, which will soon be expanded to include sports, trivia, and movies. It will also be introducing its "Digi Makeover" game, which will allow teen girls to take their own picture and manipulate it on their televisions. It's expected to be a big title, but it'll face some stiff competition from Motley Fool Stock Advisor selection Hasbro
By focusing on some of the old-school games, Radica has lately schooled the market, even though shares have traded fairly tightly between $8.50 and $9 a share for the past year. Yet this market hasn't rewarded investors for several years now, and it will take a string of well-played quarters to score any points with them.
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