MicroProse stock dives over losses Game maker suffers from 'growing pains'

June 03, 1993|By Kim Clark | Kim Clark,Staff Writer

The employer of William Loomis, a stock analyst who follow MicroProse Inc., was incorrectly identified in yesterday's Business section.

Mr. Loomis works for the Baltimore office of Ferris, Baker Watts Inc.

The Sun regrets the errors.

Like one of its simulated airplanes caught in a computerized air pocket, MicroProse Inc., a Hunt Valley-based computer game maker, was scrambling yesterday to pull itself out of a tailspin.

The company's stock closed down 20 percent yesterday, to $6 a share, after plunging earlier in the day to $5, a 52-week low.


The turbulence came in reaction to a surprise announcement Tuesday night that the company estimated it lost more than $5 million in the six months ended March 31, that it was in violation of covenants on its bank credit lines, and that one director had resigned.

Investors and industry analysts said MicroProse was suffering from classic corporate maturing pains as it followed the computer game industry's transformation from small entrepreneurial shops to mid-sized businesses run by experienced managers.

A company official insisted yesterday that despite the financial troubles, the company remained strong, and that managers would soon find investors to pump in badly needed cash.

Gerard R. Blair, MicroProse's vice president of marketing, said the company hired two investment firms, Alex. Brown & Sons Inc. and Piper Jaffray Inc., to help it "review strategic financing alternatives," including obtaining new financing.

Meanwhile, James M. Dale, president of the Baltimore advertising company W. B. Doner & Co., resigned May 21 from the board because of disagreements with how the company was managed, Mr. Blair said. Mr. Dale and other noncompany directors did not return calls yesterday asking for comment.

Mr. Blair said at least two groups were considering making an investment in the company.

While Mr. Blair declined to disclose the identity of the groups, it was clear from the announcement that one of the groups mulling the investment is Timonium-based Grotech Partners Inc., a venture capital and investment company.

Grotech interested

The company said Dennis J. Shaughnessy, a MicroProse director who is associated with Grotech, might resign from the company's board because his group was considering making an additional investment.

Mr. Blair said it would be "reasonable" to expect a resolution of the financial crunch "by the end of the week."

He said managers were meeting with the company's banks, including Signet Bank, which have asserted that MicroProse is in technical default of its loans.

Mr. Blair said the company was disputing some of the banks' assertions, and was seeking new credit terms in meetings held late yesterday.

Although yesterday's sell-off in the company's stock indicated that many investors were afraid the company was in trouble, the largest outside holder of MicroProse stock, Boston-based mutual fund company FMR Corp., was holding firm.

Harris Leviton, who manages FMR's Fidelity Retirement Growth fund and holds nearly 10 percent of the company's stock, said he was surprised by the size of MicroProse's estimated loss. The company said it expected a $5.3 million loss for its 1993 fiscal year ended March 31.

The results included a one-time $2.5 million charge in the fourth quarter and a recalculation of third-quarter results to include a charge of $1.6 million to reflect an increase in the cost of sales.

But, Mr. Leviton said, he viewed the fourth-quarter charges -- $1 million for inventory write-downs, $1.1 million for software development and $400,000 for layoffs and restructuring -- as an attempt to account for all of the company's problems and start fiscal 1994 with a clean financial slate.

Further action needed

Although he thinks the company needs to take further action, Mr. Leviton said he still likes MicroProse's games, such as the flight simulator "F-15 Strike Force" and the fantasy "Civilization."

But some MicroProse customers were not so enthusiastic.

The company said its 1993 sales would be below previous company projections of $50 million, reaching only $46.5 million.

Although those sales would be up from 1992's $41.4 million, the company said sales were hurt by its failure to get new games in stores for the important Christmas selling season.

And some new games proved unpopular because they were too complicated, the company said. Some required players to load as many as 10 disks into a computer.

A quick look yesterday at the MicroProse's own electronic bulletin board, available to any computer user, shows some games also suffered from quality problems.

Players have sent the company and each other messages crying for help or raging in frustration at the bugs in new games, such as "Darklands." The company has published seven versions of that game in an attempt to clean up problems.

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