Carburton Street, London -- Will David Beckham score with computer game enthusiasts this Christmas? Shareholders of Rage Software (LSE: RGE) certainly hope so. The company's new game, David Beckham Soccer, could revive the fortunes of Rage, one of the many computer game companies suffering at the moment.
The past two years have been tough for the likes of Rage. The transition to 'next generation' consoles, such as Sony's Playstation 2, Microsoft's (Nasdaq: MSFT) Xbox and Nintendo's Gamecube, has meant game players deferring software purchases. Rage saw a 1999 £3m profit turn into a £10m loss last year.
The scale of the downturn was again shown in today's results from SCI Entertainment (LSE: SEG). The company reported sales collapsing 50% to £2m and losses growing from £6m to £10m. However, in tune with many of its rivals, SCI believes the eventual consumer shift towards the new consoles will lead to an industry recovery. And with its The Italian Job and Thunderbirds games doing relatively well at the moment, SCI's said trading in 2002 should be "very strong".
Other games companies hoping for an improvement in 2002 include Argonaut Games (LSE: AGT) and Warthog (LSE: WHOT). These two companies have the notable distinction of being able to generate a profit at the moment. Argonaut has a Harry Potter game out this Christmas, while Warthog expects good things from Rally Championship.
However, Wednesday's results from Eidos (LSE: EID) provide an investing lesson for those who dabble in computer game developers. The company's history highlights the inherently faddish nature of this particular industry. Two years ago, whilst riding high on the Lara Croft Tomb Raider game, Eidos reported full year profits of £38m and operating margins of nearly 20%. Wednesday's interim losses came to about £20m. But significantly, no mention of Ms Croft, nor Tomb Raider, was made in the latest Eidos statement.
While the current industry talk is of a fast recovering 2002, the "here today, gone tomorrow" nature of computer games generally means the sector is a no-go area for long-term shareholders. Although there is a half chance of short-term riches, investors will generally get more enjoyment from buying the games this Christmas, rather than buying the shares of their developers.
More: Duelling Fools -- Eidos
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