Mad Catz Interactive F2Q10 (Qtr End 9/30/09) Earnings Call Transcript

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2009-11-10 18:06:24.0

Tags: Inventory, Mad Catz Interactive Inc., Call Transcript, Earnings, Call, Duty, Games, Sales Strategy, Personal Technology, Sales, Seeking Alpha

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from the line of Sean MacGowan with Needham.

Sean MacGowan - Needham & Company

The question I have relates to what you are seeing as the business migrates slowly but perhaps more quickly in the future towards games or add-ons that are digitally downloaded -- is this something that is good, neutral, or bad for the sale of accessories?

Darren Richardson

I think there are some opportunities where the actual -- particularly if the game requires hardware, it’s an advantage both for the publisher and also for retail because you can actually bundle digital content, or at least a scratch card to unlock digital content into hardware and get a retail presence and move forward.

One thing for sure is you can't digitally download hardware, so that part of the business should remain consistent and one of the nice things with the Mad Catz business, while there are games that require accessories, then we are definitely in the marketplace to support all those products.

Sean MacGowan - Needham & Company

Okay. Thank you.

Operator

(Operator Instructions) Our next question comes from the line of Ronald Rodder with RLR Partners.

Ronald Rodder - RLR Partners

Your inventories are up quite significant, especially relative to sales being down and you talked about part of that being because you wanted to be prepared for the launch of Call of Duty. Can you give us any just rough ballpark idea how much of that inventory is in fact related to Call of Duty?

Darren Richardson

There’s actually two aspects to the inventory, Ron -- one is we built the inventory early to free up the capacity; second is retailers definitely bought late, which we interpreted and anticipated. We thought that would be the case but then we also had to build the Call of Duty inventory through that period and have it shipped here, which takes a couple of weeks so that it is on shelf for launch. Call of Duty is going to be a fairly significant item for us this quarter, without any question. And so there’s a meaningful amount of sales there but basically we’ve got a lot of that inventory staged for this quarter and hopefully the quarter is going to be a strong one.

Ronald Rodder - RLR Partners

Well, I mean, is Call of Duty -- I mean, that $35 million inventory figure, is it reasonable to expect that 25% of that is related to Call of Duty?

 

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