Mad Catz Interactive, Inc. (AMEX: MCZ) has been a dismal video game-related stock which never really get off of the ground. Its annual sales have also not shown any growth even when the sector was rapidly growing. The interactive entertainment accessory provider (video game peripherals) has entered into a multi-year licensing pact with Nintendo (NTDOY).
Mad Catz has secured the rights to produce and distribute peripheralsfor the popular Rock Band™ video game for the Wii™ system. Theagreement is a worldwide agreement for markets outside of Asia. Thecompany will produce a bass guitar and a portable drum percussion set,which should be available early in 2009.
This looks like an add-on deal more than anything. The company beganshipping its Fender(TM) Precision Bass guitar for the Xbox 360 inSeptember. The Wii version of this game hit shelves this last June,and if you include all gaming systems this game looks like it has soldmore than 4 million units. So the company has already startedcapturing some market share here.
Scoring any contract for the Wii had been a good forshareholders in the past. Unfortunately we are in the midst of arecession. Video game companies are issuing warnings. It doesn’t looklike it will even make it in time for the Christmas season. Ourindications indicate that the only Christmas gifts people are getting this year willbe lumps of coal, so maybe it isn’t missing that much afterall. With these peripherals costs and with the Special Edition bundleof Rock Band 2 running $189.99, this might not be the layup that itwould have been 12 or 18 months ago.
Mad Catz shares are down by 4% today at $0.39, but shares did brieflypop big on this news. Despite being up about 40% from its recent lows,shares were around $1.20 a year ago. This stock is right around itshistoric lows of the last 5-years and longer.
On the surface, it is surprising that one of the larger devices andperipheral makers hasn’t stepped in brought this company under itsumbrella. With a $23 million market cap, even a huge premium buyoutwouldn’t cost that much. But with sales having declined for at leastthe last two-years, it doesn’t seem as though there is a need or ahurry to do anything.
Jon C. Ogg
November 6, 2008