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Interplay to Cut Staff 10%, Trim Management Pay

Earnings: Irvine game maker's third-quarter losses blamed on shipping delays, poor sales and product returns.

October 28, 1998|P.J. HUFFSTUTTER | TIMES STAFF WRITER

Irvine game maker Interplay Entertainment Corp., posting sharply higher losses for the third quarter, said Tuesday it plans to reduce its staff by 10% and cut upper-management salaries.

Interplay said it lost $15.1 million, or 83 cents a share, for the three months, compared with a loss of $5.5 million, or 49 cents per share, for the same period last year. Analysts had expected the company would earn between 3 and 6 cents a share for the quarter, according to a survey by Zacks Investment Research.

Revenue rose slightly to $24.5 million from $23.8 million.

Company officials blamed the larger losses on poor sales, higher-than-expected product returns and shipping delays on several game titles.

"We had counted on 'Fallout 2' and 'Earthworm Jim 3' and 'Messiah'--all of which we think will do very well--getting out to market before the fourth quarter," said Jim Wilson, chief financial officer.

"We all feel embarrassed about this. But there's no way around it. Such delays are going to affect our quarterly earnings."

To compensate, the company is restructuring its staff. It cut about 50 jobs from its worldwide staff of 500 on Tuesday. Interplay has about 425 people working out of its headquarters in Irvine.

The firm said it also plans to reduce the salaries of its upper management, but officials declined to discuss particular salary cuts.

Interplay also said it has retained its investment banker, Piper Jaffray, to consider strategic partnerships with rival game companies. It did not elaborate.

Officials admitted the company is experiencing a cash crunch, but they declined to say whether Interplay would sell off part of its operations to raise capital.

Hoping to extend the company's credit line, Chief Executive Brian Fargo said he is offering to put up $5 million of his own funds as collateral.

Best known for its outrageous marketing campaigns, Interplay has struggled in recent years. The company has not turned an annual profit since 1995.

The Irvine developer also has taken its lumps in the stock market.

Interplay went public in June, trading at $6 a share. After moving up to a high of $8.25 in July, the shares began dropping, hitting a low of $1.50 on Oct. 8.

The company announced the disappointing financial reports after the markets closed Tuesday. The stock rose 19 cents a share to $2.75 in Nasdaq trading.

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