Shares in Eidos, the computer games maker best known for Lara Croft and the Tomb Raider series, plunged 36 per cent yesterday after the group issued its second profits warning in three months.
Eidos shares closed 230p lower at 375p after the former stock-market star warned that its full-year results would be "substantially below" expectations due to lower-than-forecast sales of its computer games. The shares stood at 1,286p just six months ago.
Analysts are now forecasting a loss before exceptionals of £17.3m for the company this year. Eidos is now seen as a possible takeover target.
The company blamed the latest profits warning on the transition under way in the computer games market as consumers wait for the launch of new terminals such as PlayStation 2, which is due this autumn, and Microsoft's X-Box, which is expected next year. Games enthusiasts are holding back on buying software until the new consoles become available, the company said.
Other factors include reduced orders from retailers, which have been left with unsold games on the shelves. Margins and sales have been further depressed by aggressive pricing policies by retailers such as Dixons, Woolworths and Comet, which have been "bundling" up to four computer games free with games consoles in an attempt to shift more stock.
Eidos will now delay the launch of some of its new titles - such as Nomad Soul, F1 World Grand Prix and Daikatana - to allow time for retailers to sell off their existing supplies.
Eidos denied that some of its best-selling titles, such as Tomb Raider, are now on the wane. Mike McGarvey, the chief operating officer, said: "The titles are performing well in the charts, but the overall numbers are down." He said that sales of a top game in the UK were 10 per cent lower than at this time last year. Sales are down by 20 to 25 per cent in France and Germany, and by 20 per cent in the United States. Mr McGarvey said: "If our titles were not up there in the charts we would have to say: 'Hey, are we putting crap products in the marketplace?' But that's not the case."
He denied that the allure of the pneumatic heroine Lara Croft might be fading. "Super Mario lasted 12 to 13 years. Once you've captured the consumers' minds you can retain popularity as long as you continue to innovate," he said.
Mr McGarvey said prices were falling, with many games being sold for as little as £19.99 compared to £39.99 a year ago. Eidos is considering cutting its products as fewer customers are now prepared to pay the current premium for the group's software, much of which retails at about £29.
Kean Marden, analyst at Warburg Dillon Read, said the computer games market was going through the same cycle as it did five years ago when sales stalled ahead of the launch of new 32-bit hardware. He said Eidos could become a takeover target, with Microsoft and Infogrames of France cited as possible predators.
Eidos is raising cash by selling its holding in Opticom, a Norwegian data storage firm, for £84m.
The company issued a profits warning in January, when it blamed disappointing Christmas sales and product delays.