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SouthPeak reports $2.6m loss in second quarter

Revenues drop 42%, but company says it is well placed for the future

SouthPeak Interactive has reported a loss of $2.6 million (£1.6m) for the second quarter ending December 31, 2009, compared to profit of $1.2m (£760k) in the same quarter of fiscal 2009.

Revenues for the quarter dropped 42 per cent, from $17.3m (£11m) to $10.1m (£6.4m) - a reduction which the company put down to fewer releases over the Christmas period.

Operating expenses were down though, decreasing 29 per cent to $5.3m (£3.36m). This was primarily due to a $3.3m gain in the settlement of trade payables following the termination of a distribution agreement.

This gain however was partly offset by the $3.1m SouthPeak was forced to pay German publisher CDV in December when a court found it in breach of contract with the company.

"Given the challenging and crowded retail market that continues to operate under unprecedented inventory controls, we shipped only two new titles as a strategic decision to release those games that we knew would succeed during the peak fourth calendar quarter selling season," said Melanie Mroz, CEO of SouthPeak.

"We believe this defensive posturing has allowed us to fare relatively well against strong industry headwinds as we continue to execute on our proven business strategy."

SouthPeak's chairman Terry Phillips added that the trend of bigger publishers focusing on their owned franchises put the company in a good position, and also revealed that it would move into the social gaming space later this year.

"We are seeing an increasing market shift of larger publishers focusing on their owned and branded games, which offers SouthPeak increasing access to new titles at nominal fees from emerging developers.

"Partnerships such as our recent Deep Silver agreement also provide us with access to exciting new titles to capture additional revenue streams and enhance our global brand. Under this agreement we plan to release popular titles such as Prison Break for the Xbox 360 and PS3, and Risen for Xbox 360 in March.

"To further diversify our offering, later this year we plan to enter the social gaming sector, where we see a significant opportunity to grow our business through new and relevant titles introductions for this growing platform."

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