Nintendo Will Remain Strong Despite iPhone Challenge, Majesco CEO Predicts

Apple’s iPhone has become “a formidable option for handheld gaming,” Majesco Entertainment CEO Jesse Sutton said in a Q1 earnings call, but he predicted that Nintendo will maintain its strength in the market. “Nintendo’s platforms will always have” Mario, Pokemon and other popular “brands that promote the hardware,” he said Tuesday.

"This is going to be a really interesting year for our industry on several levels,” Sutton said. He said the PS3, Wii and Xbox 360 will continue to fight for “supremacy” among home consoles.

Majesco has concentrated on the mass videogame market, supporting mainly the DS and Wii in recent years. But Microsoft and Sony now seem to be focusing on the same market, he said, pointing to their new Project Natal and PlayStation Move motion-control systems. “It means that we've made the right choices” regarding which platforms to concentrate on this hardware cycle, he said. Majesco is “excited about supporting those platforms as they develop, and it just broadens our opportunity to reach more people,” he said, referring to the new motion-control systems.

The videogame market “is a business in great transition,” said Gui Karyo, Majesco’s executive vice president of operations. “You have an increasing number of people” -- including “adult women, kids, families -- playing videogames in a increasing diversity of ways, whether that’s online, on social, or on console or on handheld or on mobile,” he said. Karyo predicted that “this will be a great holiday for gaming” but said he’s not sure which platforms will be most popular. “How successful Sony and Microsoft and Nintendo are going to be at promoting their game experiences this holiday is going to be I think revelatory in a variety of different ways,” he said.

Majesco also sees social gaming as an important part of its strategy, Sutton said. The company has tested the iPhone waters and has seen the PS3 and Xbox 360 move in varying ways to social-game platforms including Facebook, he said. Majesco plans to discuss social-game efforts during the year, he said. “We have nothing specifically to announce today, but they absolutely are platforms that we anticipate developing product for."

Majesco’s revenue for the quarter through January fell to $29.2 million from $32.8 million (CED March 17 p9). Profit fell to $3.8 million, 10 cents a share, from $4.2 million, 15 cents. The results were in line “with our internal expectations, and we remain on track to deliver improved profitability for 2010,” Sutton said.

"The comparison to last year was challenging,” said Chief Financial Officer John Gross. The company released its first Jillian Michaels exercise title in October 2008, and it was “very strong,” selling “almost 300,000 units as it benefited from limited competition in its genre,” he said. A follow-up released in October 2009, Jillian Michaels’ Fitness Ultimatum 2010, “performed as expected, but it was down substantially” from the previous game, he said.

Majesco’s Cooking Mama series, however, “had another strong performance as it sold over 500,000 units in the quarter benefiting from the launch of our third DS title, Shop and Chop, as well as the continued strong sales from the Mama catalog,” Gross said. The company’s Q1 DS revenue totaled $20.3 million, up from $11.2 million a year earlier on strong demand for the Mama games and “a strong showing” for Alvin and The Chipmunks: The Squeakquel, based on a movie of the same name, he said. Wii revenue tumbled to $8 million from $21 million, “primarily as a result of the strength of last year’s Jillian title,” Gross said.

The company was able to reduce annual expenses $2.5 million to $3 million by closing its internal development studio, “making substantial reductions in the U.K. and further reducing headcount and expenses at our headquarters,” Gross said. “Headcount is down more than 20 percent from the beginning of last year,” he said. Majesco cut 16 employees, about 17 percent of the total, in January, it said in a 10-Q filing with the SEC Wednesday.

Coming Majesco games include a second line extension for the Mama franchise, Crafting Mama, shipping this fall for the DS, and the company plans to “introduce an additional line extension later in calendar 2010,” Sutton said. The company has sold more than 6 million copies of games in the series, he said. Other 2010 games will include another exercise title -- Zumba Fitness, for platforms yet to be announced -- and Ghostwire: Link to the Paranormal, designed to “fully utilize” the Nintendo DSi cameras, and Attack of the Movies 3D, Sutton said. Attack, Majesco’s first stereoscopic 3D title, will come with a pair of 3D glasses for each of four participants in multiplayer, the company said. It didn’t mention the kind of glasses. Majesco had said the title would be released exclusively for the Wii but early this week said a version for the Xbox 360 will also ship in May.