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Friday, Feb 14, 2025

CORPORATE FOCUS—At TDK, Making Games Is More Than Child’s Play

Summary Business: Videogame software maker Headquarters: Calabasas CEO: Vincent Bitetti Market Cap: $22 million Dividend Yield: N/A* Total Liabilities: $6.8 million P/E: N/A Long-Term Debt: $5.3 million * TDK Mediactive does not pay dividends When TDK Mediactive Inc. opened its doors in 1986, it focused on developing PC gaming software. But as that market declined and console games grew in the late 1990s, the company changed its focus and began making games for Sony Corp.’s Play Station, Nintendo and others. That decision turned out to be the right one for the Calabasas-based company. With the technological advancements in videogame hardware, the industry has grown considerably and TDK is riding that wave. In the company’s second quarter ended Sept. 30, TDK’s sales nearly tripled to $4.6 million from $1.2 million for the comparable period last year. But keeping up with the industry has proven somewhat more difficult. Costs associated with development and a changing lineup of games led to a net loss of $94,918 for the period, compared to a net profit of $153,669 for the comparable quarter in 2000. Martin G. Paravato, TDK’s CFO, said the company’s marketing costs more than doubled over the second quarter of last year. “It takes more money to develop and market these games,” Paravato said. After trading in the $.25 range, TDK’s stock, traded on the Over-the-Counter Bulletin Board, began pushing upward in April to the $1.00 range. On Friday the stock closed at $1.04. Analyst Michael Gardner of Wedbush Morgan Securities, said TDK’s big third quarter performance was due in large part to the popularity of its “Shrek” videogame. The company had shipped more than 200,000 units to retailers during the quarter. “They seemed to hit it big with ‘Shrek’ which just sold like gangbusters,” Gardner said. “That really gave them momentum that is still continuing.” The game along with another game, issued in August, called “Lady Sia,” gave the company strong sales heading into the fall, Gardner said. TDK operated as Sound Source Interactive until the fall of last year when TDK USA Corp. purchased a controlling interest in the company and changed its name, at the same time diversifying its product lines and expanding its marketing capabilities. Gardner said the company had been hurt by its focus on PC-based games instead of the more popular console-based systems like Game Boy or Nintendo. “They decided to get away from the PC business and go more toward the platforms like Game Boy, but that means increased costs to develop games for those consoles,” he said. Since then, TDK Mediactive has added licensing agreements with many of the industry’s major players. “Although our sales improved substantially over the prior year and prior quarter, the results were somewhat impacted by slower than anticipated Game Boy Advance hardware at retail,” said company CEO Vincent Bitetti, referring to the slow sales following the Sept. 11 terrorist attacks in the U.S. “Sept. 11 hurt the company, there’s no question, but they still did great business after that.” Gardner said that the company’s tie-in with the DreamWorks SKG animated blockbuster was key to its success. “It was a popular movie, so there was interest in the game before anyone saw it, but it’s great game,” he said. Paravato said the company was also able to capitalize on the game “Casper the Friendly Ghost” for Play Station 2 and others which were based on other characters the company has licensed. “It’s hard to say how we’ll do in the next quarter, but we’re going to have a better Christmas than we did last year. We’re already seeing a strong trend,” he said. Shawn Milne, an analyst with SoundView Technologies Inc., predicted brisk holiday sales for the industry that could match last year’s holiday numbers of roughly $6 billion. With new game platforms hitting the shelves this month, including Microsoft Corp.’s Xbox and Nintendo Co.’s GameCube, Gardner said TDK’s games figure to be big sellers. “We’ve seen the Xbox version of ‘Shrek’ and it looks great. The graphics, the look and feel of the game is superior to the Game Boy version,” Gardner said. TDK Mediactive has also acquired licensing rights to DC Comics’ Aquaman, Casper the Friendly Ghost and others, which will be featured in games set for release next year. “They have a knack for being able to get decent properties and for being able to come up with some pretty good games,” Gardner said.

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