Eidos’ Lara suffers a sales blow in the US

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The latest episode of the all-action adventurer, Underworld, was released in November in time for the Christmas market. While European sales were up to scratch, the game took a pounding in the US where retailers were wary of stocking up big time and keen to discount even premium sector video games in a desperation to drive footfall into their stores. That left US sales well below expectations.

Eidos, the renamed SCi Entertainment and Britain's last substantial remaining video games house, said it sold 1.5 million copies to 31 December, which was below internal forecasts.

Overall sales for the year to next June have now been scaled back from £180-£200 million to £160-£180 million. That means lower profits and potential breaches of the group's banking agreements. It said today it had passed its peak borrowing level and had "sufficient headroom" in its current agreement but could be forced to start discussions with its bank if the new profit expectations mean it could breach June 2009 covenants.

Meanwhile, the giant Warner Brothers which lifted its stake in Eidos to just short of 20% can still take it up to 29.9% with Eidos's say-so under a standstill agreement which runs until 25 January. Today the shares fell 6p to 111/4p.

Eidos and Warner work closely on things like the Batman: Arkham Asylum game which was trailed on DVD's of the The Dark Knight film.

Eidos produces other top-selling games such as Hitman, Championship Manager and Just Cause.

Analysts said while Warner will be in pole position to launch a takeover bid if Eidos needs rescuing it will face competition from rivals Electronic Arts and Ubisoft. Once valued at more than £500 million, Eidos has tumbled in the last 18 months. The firm is now worth just £45 million.

A management shake-up saw SCi Entertainment founder Jane Kavanagh ousted a year ago and Phil Rogers brought in as chief executive. He has cut jobs and axed poorly performing games. Today he repeated a need to focus on "high quality titles that will deliver long-term franchise value."