Original URL: http://www.theregister.co.uk/2005/08/18/infinium_woes/
Infinium puts ex-Xbox exec in charge
But can Bacchus overcome financial worries?
Analysis Kevin Bacchus, one of the team of four who founded Microsoft's Xbox division, has become CEO of Infinium Labs, the company developing the Phantom console and games service.
No, don't laugh. It could actually be happening this time.
Indeed, according to Tim Roberts, Infinium's founder and former CEO - he's staying on the board - the company is "entering a new phase where it must remain tightly focused on the nuts and bolts of bringing our service to market".
Bacchus joined Infinium in January 2004, though the company first touted its console a full year before that. Then, Phantom was set to ship at the end of 2003, the company claimed, and the release date has been shifting back ever since.
The Infinium website currently implies the Phantom and game service that will feed it games content across broadband Internet connections will launch toward the end of 2005.
Bacchus was brought on board to build relationships with content developers - one of his roles within Microsoft's Xbox division. Infinium has deals in place with Eidos, Atari, Codemasters and Riverdeep, though two of those - with Eidos and Codemasters - are set to expire on 31 December 2005. Infinium has had to pledge to cough up significant sums - $500,000 to Atari alone - for these licences, and will have to pay further royalties should it ever start delivering their games via the Phantom.
Whether it will be able to do so depends on its ability to keep its head above water. According to Infinium's most recent quarterly results filing with the US Securities and Exchange Commission, it burned through almost $2.90m in the three months to 30 June 2005 alone - and that's excluding unreported "development costs". After adding in other expenses, the company reported an unaudited net loss of $6.21m for the quarter and $20.28m for half-year.
Unsurprisingly, Infinium had no revenue. Of course, the company is in development mode, and it would be surprising indeed if it didn't lose money at this stage. Start-ups generally have to spend cash to create the products they hope will subsequently bring in the bacon.
The question is whether Infinium can acquire enough cash to cover its losses in the short term. Infinium's quarterly report lists seven legal actions the company is facing, with a eighth, from Biostar, the company developing the Phantom's motherboard and graphics adaptor, being threatened. The seven all allege breach of contract or defaulting on loans. The Biostar lawsuit is expected to be filed shortly, Infinium says, though it's hopeful a settlement can be reached. However, it admits: "No payments have been made to Biostar."
Infinium's SEC filing lists a number of loans - typically for for a few hundred thousand dollars at a time - on which it has failed to make the agreed repayment.
The company itself admits: "At June 30, 2005, we had a working capital deficit of $8,781,352 and an accumulated deficit of $56,276,138. In their report on our audited financial statements for the year ended December 31, 2004, our independent auditors expressed substantial doubt about our ability to continue as a going concern." (our italics)
The filing continues: "We do not have sufficient cash to continue operations for the next 12 months and are in immediate need of additional capital to fund our plan of operation. We presently have no commitments for additional financing and may not be able to obtain such financing."
Bacchus' games industry credentials may help it win further backing. For his part, Bacchus is planning to make "additional announcements regarding the company's restructuring... over the next few weeks", according to Infinium's statement on his promotion.
Meanwhile, the company is redesigning the Phantom hardware to bring it in line with technological developments made after those available when the version of the console intended to be released last year was completed. The Phantom Game Network is also being tweaked.
The Network is crucial. The ability to rent games by downloading them is essential to differentiate Phantom from the likes of Xbox 360 and even Sony's PlayStation 2, let alone the PS3. With it, Infinium hopes to appeal to casual gamers and those up for a play but who don't have a games store they can visit straight away for the latest title. It's a good idea, but Infinium has only a limited amount to time before other, better known and better resourced rivals get in on the act. ®