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Mad Catz is a worldwide leader of innovative peripherals in the interactive entertainment industry. Mad Catz designs and markets a full range of accessories for video game systems and publishes video game software, including the industry leading GameShark brand of video game enhancements. Mad Catz is publicly held and trades on both the American Stock Exchange and the Toronto Stock Exchange under the symbol MCZ.
With its acquisition of the GameShark brand in January of 2003 and the launch of its expanded GameShark product line, Mad Catz has emerged as the Industry’s only one-stop-source for a complete line of hardware and software accessories for the next-generation hand-held and video game consoles.
Founded in 1989, Mad Catz employs approximately 130 people and is the leading third party video game accessory company in the world with sales for the fiscal 2004 year, which ended March 31, 2004, of $102.1 million. Incorporated in Ontario, Canada, Mad Catz is headquartered in San Diego, California and has Hong Kong and China-based operations responsible for the development of certain products and for managing the Company’s manufacturing, which is outsourced to contract manufacturers in South China.
Mad Catz’ products are sold and distributed globally under the Mad Catz and GameShark brands. Additionally, in Europe the Company also distributes products for Fire International under the Xploder brand. Mad Catz maintains a 95,000 square foot distribution facility in Mira Loma, California and supplies its products to thousands of domestic and international retail locations including, ASDA, Auchan, Carrefour, Curry’s, Best Buy, Blockbuster, Circuit City, Dixons, EB Games, Future Shop, GameStop, K-Mart, Meijer, Meijer, Musicland, Target, and Wal-Mart.
Mad Catz’ London office and warehouse broadens its distribution capabilities for the quickly growing European marketplace. Additionally, Mad Catz’ products are available in many regions where the Company does not have direct sales offices, including South America, Mexico, Australia, New Zealand, the Middle East, Singapore and Japan.
Products
Mad Catz offers a full line of accessories for the leading video game platforms including the Sony PlayStation® 2 and PS one™, the Microsoft Xbox™, the Nintendo GameCube™, Game Boy® Advance and SP and the Nokia N-Gage. Mad Catz recently announced accessory introductions to support the new Nintendo DS,™ the Sony PSP™ and Apple Computer’s iPod® and iPod Mini®. With its high-quality, innovative peripherals, Mad Catz’ products have garnered rave reviews from retailers, the media and game enthusiasts.
Mad Catz’ product line features over 120 leading edge, top quality products, available at multiple price points. Within those products, Mad Catz’ accessories fall into the following seven broad categories:
1) Core offerings include products like controllers, memory cards and RF switches. Mad Catz’ Core products offer value-priced, feature rich alternatives to first party products.
2) Simulation products include the beat pad, steering wheels, and light guns. The Simulation offerings heighten the gaming experience by adding a layer of realism and excitement not available from the first party.
3) Convergence products include DVD remote controls and audiophile cables. From watching a DVD with the sharpest picture possible to enjoying the high fidelity audio capabilities of the latest consoles, Mad Catz’ Convergence products let gamers unlock the full potential of the convergence media capabilities built into their consoles.
4) Innovative products include the Lynx™ wireless controllers, the LumiCON controllers, the MicroCON controllers and for an “old school” kick, the RetroCON controller. Not typically offered by the first party provider, Mad Catz’ Innovative products highlight the Company’s industry-leading design and engineering capabilities, and offer a ground breaking gaming experience.
5) Portable product offerings include lights, carry bags, batteries and grips for hand held gaming systems like the Game Boy Advance and SP, the Nokia N-Gage and Sony’s PSP™. Mad Catz’ portable products harness the uniquely flexible characteristics of a portable platform, enabling gamers to customize their entertainment experience with a broad assortment of affordable extras not typically available from the first party.
6) Software: GameShark, Mad Catz’ line of video game software enhancements, unleashes the capabilities of popular software titles, allowing gamers to enhance their experience by gaining access to previously restricted features, like the ability to start at different levels, to gain additional lives, and to enjoy improved skills and abilities, among other features. GameShark products are available for every major console and portable system currently on the market. Mad Catz launched its first software product, MC Groovz Dance Crave Game, in November of 2005, which was the first dance game introduced for the Nintendo GameCube. Mad Catz plans to continue producing software as a revenue category complementary to its core product offerings.
7) Branded: Mad Catz has signed licensing agreements with major sports names, including the NFL, MBA and MLB, as well as entertainment names, including Disney and Marvel, to produce co-branded accessories, generating interest from current customers and new target markets. Mad Catz also produces accessories for Apple Computer’s iPod® and iPod Mini®. Mad Catz’ branded products include backpacks, clips, brand-specific controllers and carrying cases.
The Industry
The home video game industry is characterized by the launch of new console systems that typically have a five-year life cycle. The currently available fourth-generation of systems, which are based on 128-bit processors, were launched in 2000 and 2001, in addition to the latest line of hand-held consoles, launched in early 2005. Each subsequent generation of systems has significantly outperformed the previous in terms of total revenue generated and games and consoles sold.
The fourth-generation system introductions commenced with Sony's PlayStation 2 in 2000, while Microsoft and Nintendo brought greater variety of consumer offerings to the fourth generation arena with their respective introductions of the Xbox and GameCube in 2001. By the end of 2003, the estimated total installed base of fourth-generation consoles from Sony, Microsoft, and Nintendo in North America was approximately 37 million units.
The next generation of console systems is expected to ship from Sony, Microsoft, and Nintendo in late 2005/early 2006.
Hardware sales in the hand-held market are led by Nintendo, which introduced its Game Boy Advance in 2001. Incorporating additional features into a new form factor, Nintendo introduced its Game Boy Advance SP in early 2003. The most recent entrants into the portable were Nintendo’s Dual Screen in November of 2004 and Sony’s PSP in March of 2005.
A key industry driver for growth is the expansion of the installed player base. Two primary factors contribute to that growth: first, that traditional gamers replace third-generation systems with the latest technology; and second, that video game consoles continue to appeal to a wider, more mass-market of users.
In 2004, the US home console and portable markets for combined hardware, software, and accessories had total retail sales of approximately $11.1 billion (Source: Harris Nesbitt). Of those sales, accessories represented approximately $1.2 billion, or 12% of the total market (Source: NPD). From 2000 through 2004, the total market for video game accessories grew at a compound annual growth rate (CAGR) of approximately 11% from $800 million in 2000.
Investment Considerations
Mad Catz is a leader in a dynamic, fast-growing industry that has solid prospects for continuing growth as the Company expands its product breadth, distribution network and licensing portfolio. The Company, known for innovation, is profitable and has growing market share, considerable operating leverage, working capital to fund future growth, deep domestic and international distribution, and a knowledgeable and skilled management team.
For additional information about Mad Catz or to speak with someone in greater detail about investing in Mad Catz, please click on the “Info Request” tab above, or email mcz@jcir.com.
Safe Harbor For Forward Looking Statements:
The above information statement about the Company and the industry in which it participates contains forward-looking statements about the Company’s business prospects that involve substantial risks and uncertainties. The Company assumes no obligation to update the forward-looking statements contained in this press release as a result of new information or future events or developments. You can identify these statements by the fact that they use words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “should,” “plan,” “goal,” “believe,” and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. Among the factors that could cause actual results to differ materially are the following: the ability to maintain or renew the Company’s licenses; competitive developments affecting the Company’s current products; first party price reductions; the ability to successfully market both new and existing products domestically and internationally; difficulties or delays in manufacturing; or a downturn in the market or industry. A further list and description of these risks, uncertainties and other matters can be found in the Company’s reports filed with the Securities and Exchange Commission and the Canadian Securities Administrators.
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