GTR Revenues Up, But Subsidiary Mad Catz Faces Lawsuit By NYKO

On the upside, the company announced record revenues for fiscal Q3 (ending December 31). But the company also reported smaller margins, and its subsidiary Mad Catz was hit with a lawsuit by NYKO Technologies. First, the good news. GTR's fiscal results for the quarter reached $64.5 million -- an increase of 13% over last year -- and Mad Catz reported record net sales of $51.6 million as compared with $42.9 million last year. On the down side, Mad Catz faces financial pressures from thinner margins. Mad Catz's gross profit for the quarter declined by $2.2 million, as margins shrank from 30.8% last year to 21.3% this year. GTR's net income before goodwill charges for the third quarter was $1.9 million, compared to net income of $4.5 million for the third quarter of 1999. And that's not the extent of the bad news, either. NYKO Technologies filed a lawsuit against Mad Catz and another company, NUBY, which both manufacture products similar to NYKO's Worm Light. The Worm Light has been on NPD's list of top Video Games Accessories for year, and NYKO claims to have already won five cases against infringing manufacturers and distributors. The lawsuit alleges that the technologies used in Mad Catz's Bone Light, Mech Light, and Wild Thing, are too similar to those protected under NYKO's patents. The future of its GTR's Games Trader unit seems to be in question as well. Peter Kozicz, President and CEO of GTR Group said, "While we are pleased with the quarter's performance of our Games Trader business, we continue to look for strategic alternatives for the redeployment of those assets." Looking forward, Kozicz said that the delay in PS2 shipments will continue to hurt his company due to the deferral of sales. "The delay in the shipment of PlayStation2 game consoles has reduced accessory sales at the retail level and will continue to do so until the imbalance of supply/demand is corrected," Kozicz said. "For that reason we anticipate a continued softness in the market that will result in our inability to meet analyst expectations for the fourth quarter."