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Majesco Reduces Fiscal Outlook and Shuffles Management

by Judy on July 12, 2005 @ 2:18 p.m. PDT

Majesco today announced it is revising its figures for the fiscal year ending October 31, 2005 to reflect reduced net revenues and operating results. Additionally, current Board member Jim Halpin has been elected Chairman of the Board, and Chairman and CEO Carl Yankowski has resigned.

The Company's previously stated expectations were for net revenues of $175 to $185 million and operating income of $16 to $18 million with at least 50 percent of the net revenues occurring in the fourth fiscal quarter. The Company now anticipates net revenues for fiscal 2005 to be between $120 million and $125 million and an operating loss of $16 million to $19 million. Included in the expected operating loss are: write-downs of receivables as a result of a recent bankruptcy of one of the Company's customers; provisions for impairments of capitalized costs and severance costs; as well as increased allowances for price protection which will be recorded as a reduction of revenues. The Company anticipates that these items will total approximately $12 million and be included in the fiscal third quarter.

As a result of the factors described above, the Company expects net revenues for the current quarter ending July 31, 2005 to be in the range of $5 million to $10 million, net of the aforementioned increased provision for allowances for price protection, and an operating loss between $19 million to $22 million.

The lower expectations are attributable to the following factors:

  • Substantially weaker than expected sales across all of the Company's product lines
  • The movement of one of its key movie-based video game titles out of the fiscal year in order to better coincide with the related theatrical release
  • Recent feedback concerning inventory levels indicates lower than expected initial orders for many of the Company's products, and soft reorders for the remainder of the year
  • An exceptionally slow summer season exacerbated by an earlier than expected impact of the upcoming video game platform transition

"We are disappointed in our anticipated results for the year. Our weaker than expected sales and recent discussions with industry partners have led us to conclude that it is prudent to adjust our guidance," said Jesse Sutton, President. "Despite the difficult retail environment we are experiencing, we plan to exploit the growing market for video game products and remain focused on producing high-quality games and other digital entertainment products."

An immediate search for a permanent CEO has commenced. The Board's decision to appoint Mr. Halpin, an independent director, to the position of Chairman reflects its continued commitment to effective corporate governance practices. Additionally, Jim will be actively involved with the management of the Company and will spearhead the search for a new CEO. Mr. Halpin is on the boards of Marvel Entertainment and Life Time Fitness, Inc., and is the founder of Riverbend, Inc, a private investment firm. From 1992 to 2001, he served as president and CEO of CompUSA and in 1998, was named one of the Top 25 Managers in the World by Business Week.

In addition, the Company announced that John Gross has joined the company as Executive Vice President and Chief Financial Officer. Jan Chason, the former CFO will assume the newly created role of Chief Accounting Officer. Mr. Gross brings with him over 30 years of financial experience, most recently as Vice President, Corporate Development with FactSet Research Systems. Previously he held CFO positions at Rare Medium and FactSet, in addition to holding senior financial positions at PepsiCo, Reader's Digest and Cadbury Schweppes. Mr. Gross is a CPA and has an MBA from NYU.

"Jim's experience in the retail industry and superior management skills make him an excellent choice for Chairman of the Board of Majesco. We appreciate his commitment to leading us through this challenging period and beyond," said Jesse Sutton, President. "We are equally pleased with the appointment of John Gross, whose diverse and extensive financial experience will support the Company's future growth objectives."

Added Jim Halpin, Chairman, "We also announced today that we have lowered our net revenue and operating income expectations for the year as a result of the conditions we are seeing in the marketplace. My objective is to work closely with the management team at Majesco to chart the Company's course for the future and regain investor confidence."

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