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Kalisto explain losses

Troubled French developer writes to shareholders to explain $20m revenue shortfall in 2000

Yesterday we reported that French developer Kalisto (responsible for the Nightmare Creatures series and currently working on several projects including a massively multiplayer game based on the Highlander franchise) had announced catastrophic results for the year 2000, with revenues almost 90% lower than forecast, resulting in a $25m loss over the year. Today we have received an update on the situation from Kalisto, including a copy of the letter sent out to shareholders on Monday in which CEO Nicolas Gaume explains what lies behind the losses.

The main reason for the shortfall is apparently delays in signing publishing deals as a result of the current uncertainty in the gaming industry and the transition to a new generation of consoles. "Sales of our offline original productions (that we self-finance until signing publishing contracts) were badly affected by the general uncertainty in the video games market. Contracts are usually finalized in the last quarter, as this is the period when publishers add new products to their catalogues .. but this difficult transition phase and the financial difficulties that have accompanied it have obliged most to delay sales commitments until 2001."

In fact Kalisto were apparently still involved in negotiations as recently as last month, but although they had letters of intent from publishers at the end of last year, the deals were not completed in time to affect their results. Hence the rather drastic difference between the Fr170m they were expecting to get and the Fr19m which they actually earned in the last financial year. With as many as seven original titles in development during the year 2000, this was obviously quite a burden, and matters weren't helped by the company's investment in online gaming, with deals which are expected to pay off over the next few years but which again haven't been completed in time to count for last year's results.

So things are perhaps not quite so dire as they first seemed, with Monsieur Gaume insisting that they are "starting the year 2001 positively" thanks to a "cost reduction plan [and] increased monitoring of production management". The delayed publishing contracts which helped to cause these shocking results have finally been signed, with publishers lined up for several games to be delivered over the next year, while negotations continue for the company's various online products.

"All analyses of the video games market look to a revival in 2002 and also indicate the development of pay per play leisure on the Internet", according to Nicolas Gaume, who added that "I am convinced that the measures we are taking will give Kalisto the means to answer the long-term demands of players in the interactive leisure market". In the meantime Kalisto are launching a "search for industrial and financial partnerships" to cover any short term cash shortfalls, with the aim being to find someone from outside the gaming and related industries to take a minority stake in the company, so avoiding the possibility of being bought out by a publisher.