Business Summary

Mad Catz Interactive, Inc. (AMEX:MCZ) was founded in 1989 and is headquartered in San Diego, California, and engages in the design, manufacture, marketing, and distribution of accessories for videogame platforms, personal computers (PCs), and iPod and other audio devices. The company sells its products to retailers of interactive entertainment products directly in the United States, Europe, Canada, Australia, Japan, Korea, New Zealand, and Singapore[1].

Its products include videogame, PC, and audio accessories, such as control pads, video cables, steering wheels, joysticks, memory cards, light guns, flight sticks, dance pads, microphones, car adapters, carry cases, mice, keyboards, and headsets. The company also markets videogame enhancement products, as well as and publishes videogames. Mad Catz Interactive markets its accessories under the Mad Catz, Saitek, Cyborg, Eclipse, Joytech, GameShark, Tritton, and AirDrives brand names, as well as under private label brands[1].

In the Fiscal Year (FY) ended March, 31 2010, Mad Catz recorded its highest revenue figure in the past five years with revenues reaching $119,012,000, up 5.42% from the year prior when it recorded revenues of $112,563,000. FY 2009 may have seen the largest revenue increase, recording revenues of $112,563,000, up 22.06% from FY 2008 when revenues were $87,737,000[2].

Mad Catz has also seen increased net income in the FY 2010, up 730.76% from -$32,614,000 in FY 2009 to $4,463,000 in 2010. Fiscal Year 2009 was a bad year in terms of net income performance, with net income decreased 1029.48% from $3,168,000 to -$32,614,000[2]. This can partially be attributed to the market conditions and also given that the carrying amount of their reporting unit had exceeded its market capitalization over a sustained period, Mad Catz determined that a triggering event had occurred in the quarter ended December 31, 2008 and therefore recorded a goodwill impairment charge of $27.9 million during the year ended March 31, 2009, therefore, in the following calculations of return on invested capital and when talking about Mad Catz fiscal 2009 net income, the $27.9 million will be added back into the operating income calculation due to the fact this was a one time occurrence and was not in direct relation to Mad Catz primary business operations[3].

Business Segments

Mad Catz targets several technology segments for the products it makes and distributes. In each of these segments, Mad Catz has a specific major brand that carries the premium products. For casual gaming, Mad Catz uses its company name; for simulation gaming, the brand Saitek is used; Cyborg is the brand used for products related to pro-gaming; Mad Catz home and office products are distributed under the Eclipse brand; Tritton is Mad Catz's audio and PC brand[2]. Each of these segments is designed to target a niche technological market. Mad Catz can serve all these segments by having a very diverse corporate structure; as of FY 2010, Mad Catz's corporate structure consisted of 13 different subsidiaries, incorporated in five different countries[2].

The gaming segment is Mad Catz's largest target, and therefore accounts for the majority of its revenue; in 2010, roughly 69% of Mad Catz sales were produced by products designed for gaming consoles. This was a 4% increase in sales from the gaming segment over fiscal year 2009. The table below further breaks down Mad Catz sales by individual segment for fiscal years 2007-2010, showing that Xbox 360 has taken over as the leading platform in which Mad Catz produces revenue; PCs had been the leader the year prior[2][3].
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The sales Mad Catz has generated from its gaming and other segments can further be broken down by product categories. Mad Catz has recently changed some of the naming of their product categories, therefore, the following two table have Mad Catz sales broken down by product category, with one table containing FYs 2006-2008, and one table with containing FYs 2009-2010.
No matter which methodology is used to describe Mad Catz sales by product category, over the past three years accessory sales have been growing. However, Mad Catz's most profitable product category has been and continues to be its controllers category. Using the new categorization of Mad Cats products, fiscal year 2010 saw controllers and specialty controllers combine for 52% of all sales, up 13% from fiscal 2009. Accessory and controller sales combine for 76% of all sales in 2010, down from 85% in 2009[2][3]. So while both accessory and controller sales are massively vital to Mad Catz success, fiscal year 2010's numbers suggest that Mad Catz is trying to diversify its product portfolio, increasing audio sales to 15% of all sales, nearly doubling the percentage of sales audio products captured in 2009.

Competitive Landscape

Since Mad Catz develops mostly after market products, meaning their products are mostly add-ons to some other company's product, they face some very stiff competition. These competitors can range from the company that makes the original product, to other companies similar to Mad Catz making derivative products for other company's work. Due to these facts, Mad Catz faces the most direct competition from Microsoft, Sony and Nintendo in the gaming industry, Mad Catz's largest segment, because these are the companies that produce the Xbox 360, PlayStation 3 and Wii, respectfully. Microsoft and Sony both compete with Mad Catz in the computer segment as well, but not to the degree they do in the gaming industry. Mad Catz receives competition from companies such as Logitech in the computer industry and competition in the audio industry from such companies as Logic3 and Griffin. The gaming industry also provides the competitors Accessories 4 Technology, NYKO, and Razer USA Ltd[2].

Still, in the gaming industry, Mad Catz is a small player compared to the big boys, Microsoft, Sony and Nintendo.
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These companies all produce a gaming platform for which actual games can be player and accessories can be bought. Therefore, as expected, Mad Catz annually produces less income than these three giant companies. In fiscal year 2010, Mad Catz reported $119.01 million in revenue, a high for the past five fiscal years[2][3], whereas in comparison Nintendo produced $17,485.91 million in 2010[4]; Microsoft produced $8,058 million with its entertainment segment[5]; Sony produced $222.340 million from its networked products and services (gaming) segment, and this is through only three quarters of fiscal year 2010[6]. However, Mad Catz and Microsoft's gaming segment were the only two of these four companies to increase revenues in fiscal 2010. The graph on the right compares Mad Catz fiscal year 2007-2010 earnings compared to Nintendo, Microsoft and Sony. In the computer industry, Mad Catz's second largest profit generating segment, Mad Catz faces fierce competition in the computer peripherals market from Logitech International. Logitech has consistently produced higher revenue figures than Mad Catz, to the tune of more than 10 times greater revenue numbers[7]. Now, a direct comparison of the two companies may not be the most accurate comparison give the vast array of products Logitech has in its arsenal that Mad Catz has no interest in producing, including webcams, video calling hardware and keyboards and mice not designed for gamers. Logitech posted revenues of $1,966.75 million in fiscal year 2010, this compared to Mad Catz revenue of $119.01 million. However, Logitech's revenue numbers have been decreasing since 2008, along with their net income numbers, which are nearly 75% less than they were in fiscal 2008.
As shown by the graph on the left, Mad Catz revenues have been trending in the correct direction, increasing revenues in the past two fiscal years, while Logitech has had decreasing revenues the past two years[2][3][7].

Financial and Operating Metrics

In the past five fiscal years 2006-2010, Mad Catz has had the most volatile and worst single year, and only negative, return on invested capital (ROIC) when compared to Nintendo, Microsoft and Logitech. ROIC is a good measure of a company's ability to generate a good return based on the invested capital of a company. Fiscal years 2007-2009 had Mad Catz report the lowest ROIC of these four companies; however, in fiscal 2010, Mad Catz reported an ROIC higher than that of Logitech, helping support the theory Mad Catz may be turning around its company. Microsoft has continually posted the best ROIC numbers, routinely ending up in the 30% range. The graph on the left shows the past four years of ROIC numbers[2][7][5][4].
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Poor ROIC performance can be attributed to either low net operating profit after tax (NOPAT) or to inflated invested capital number relative to the firms performance. In Mad Catz case, their poor ROIC numbers can mostly be attributed to their poor NOPAT performance, due to the fact that, with the exception of 2008 when their invested capital number was $91.32 million, their invested capital number hangs in the $50-60 million range.

In terms of Mad Catz liquidity capabilities, in fiscal year 2010, they recorded a current ratio of 1.4, meaning they have 40% more current assets than current liabilities; this is very useful in terms of paying off debt in the near future. This is the highest current ratio that Mad Catz had recored since fiscal 2007, when it had a current ratio of 1.8[2][8]. As adequate as these current ratio numbers may seem, Mad Catz has the lowest average current ratio numbers when compared to competitors Microsoft and Logitech, a competitor from the tow major segments Mad Catz serves. In fiscal year 2010, Microsoft had a current ratio of 2.13[5] and Logitech had a ratio of 1.8[7], meaning that both Microsoft and Logitech are in better liquidity positions.

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Using stock market numbers from April 28, 2011, Mad Catz has a P/E ratio of 24[2][9], meaning that their stock price is currently 24 times greater than their earnings per share (EPS), using fiscal 2010's EPS numbers. This means that investors are paying a premium, not for earnings generated today, but on expected earnings in the future. Using the same dates information for Microsoft, they currently have a P/E ratio of 12.54[5][10], meaning that investors are less willing to pay a premium for expected future earnings. However, Logitech currently has a P/E ratio of 39.19[7][11], possibly showing that investors have more of a belief in Logitech's future earnings than both Microsoft and Mad Catz. The graph on the right compares Mad Catz, Microsoft and Logitech current ratios for the past four fiscal years, and also compares their current P/E ratios.

Marketing and Supply Chain


As stated prior, Mad Catz offers many different products on many different platforms under many different brands. These brands are Mad Catz, Saitek, Tritton, Eclipse, Cyborg, Airdrives and Gameshark. The platforms that Mad Catz develops its products for are Xbox 360, Sony's many PlayStation platforms, Nintendo platforms and PCs and Macs along with iPods and other audio devices[12]. These products range from controllers, to games, steering wheels, memory, Personal Computer products, bundles and accessories.


Mad Catz has employees located in the United States, the United Kingdom, Germany, France, Hong Kong and other Chinese locations and Spain. The markets that Mad Catz primarily targets are the United States and Europe, and to a lesser extent Canada and Asia; all of these markets are highly competitive and are open for more competition in the future[2]. Mad Catz has its products located in and sold at the following locations: Amazon.com, Best Buy, GameStop, Meijer, Target and Wal-Mart in the United States; Future Shop and GameStop/EB Games in Canada and ASDA, Argos, Auchan, Carrefour, Curry’s, Dixons, Electronic Partner, Game, GameStation, GameStop, Media-Saturn, Micromania, PC World and ProMarkt, in Europe[2]. GameStop has personally accounted for approximately 25%, 29% and 33% of their gross sales in fiscal 2010, 2009 and 2008, respectively, taking into account all of its US and non-US entities[2].


Mad Catz major competition stems from price competition. Mad Catz tries to price its products competitively with other firms in the industry. For standard gaming controllers, Mad Catz prices its version under that of Microsoft's controller; Mad Catz currently is selling its standard Xbox 360 controller for $24.99[13], while Microsoft has their standard controller listed at $39.99[14], $15 more than Mad Catz controller price. Similarly, their PlayStation 3 controllers are priced around that of their Xbox 360 controller[15], while Sony has their controller listed at $54.99[16].

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Supply Chain

Mad Catz relies on contract ocean carriers to ship virtually all of their products from China to their primary distribution centers in the United States, Germany and the United Kingdom[2]. Their North American distribution centers are located in California. Mad Catz acquired Saitek to further diversify its products, but also to diversify their geographic distribution capabilities. One of Mad Catz's goals for future years is to continue to identify strategic opportunities for the expansion of products in adjacent and compatible categories, including transactions with companies for which products Mad Catz can leverage its global distribution capabilities[2].

Human Resources


At the time of their 2010 10K filing, Mad Catz had 246 full time employees[2], this is up from 234 employees in 2009[3] but down from 250 employees in 2008[8]. In comparison, Microsoft had 89,000 full time employees in 2010[5] and Logitech had approximately 10,000 employees in 2010[7]. Mad Catz does hire some temporary help during their busy season which is October through December. Only 30% of Mad Catz full time employees currently work in the United States. As shown by the graph on the right, Mad Catz clearly consistently has the lowest number of employees when compared to their competitors Microsoft and Logitech, who both have more than 30 times the number of full time employees that Mad Catz has.
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Employee Compensation

Mad Catz currently has only three high profile employees; Darren Richardson, President, Chief Executive Officer and Director, Stewart Halpern their Chief Financial Officer and Whitney Peterson their Vice President and General Counsel. Richardson and Peterson have both been in their positions since at least 2003 (last year of available Def 14A statements) and Halpern since 2006. The chart on the left compares Mad Catz CEO, Vice President and CFO compensations to those of Microsoft and Logitech. As shown in the chart, Mad Catz spend the least amount on both base and total compensation, trailing in the total compensation column by a substantial amount, having paid out a total of $1,512,970[25] while Logitech paid $6,894,002[26] and Microsoft paid $10,463,541[27]. What's most concerning about these figures is that fact that Mad Catz is paying out the greatest amount of its 2010 net income to its CEO, CFO and Vice President. When considering total compensation, Mad Catz attributed nearly 34% of its net income to financially support these positions, roughly 10 times more, percentage wise, than Logitech and exponentially more than Microsoft. This can be rather alarming and crippling when moving forward for Mad Catz; paying out 34% of a company's net income is not a recipe for a successful business. Mad Catz could benefit far more from reinvesting more of its income into other parts of its business and could be in Mad Catz best interest to find ways to increase its net income or lower its employee compensation as a percent of their net income.


  1. 1.0 1.1 MCZ Company Profile Retrieved From Yahoo! Finance Website April 17, 2011
  2. 2.00 2.01 2.02 2.03 2.04 2.05 2.06 2.07 2.08 2.09 2.10 2.11 2.12 2.13 2.14 2.15 2.16 2.17 MCZ 2010 10K Retrieved From SEC Website April 16, 2011
  3. 3.0 3.1 3.2 3.3 3.4 3.5 MCZ 2009 10K Retrieved From SEC Website April 23, 2011
  4. 4.0 4.1 Nintendo Earnings Release Retrieved From Nintendo's Investor Relations Website April 20, 2011
  5. 5.0 5.1 5.2 5.3 5.4 Microsoft From 10K Retrieved From SEC Website April 21, 2011
  6. Sony 2010 Earnings Release Retrieved From Sony Corp Website April 20, 2011
  7. 7.0 7.1 7.2 7.3 7.4 7.5 Logitech 2010 10K Retrieved From SEC Website April 15, 2011
  8. 8.0 8.1 MCZ 2008 10K Retrieved From SEC Website April 11, 2011
  9. MCZ Current Stock Price Retrieved From Yahoo! Finance April 28, 2011
  10. MSFT Stock Price Retrieved From Yahoo! Finance April 28, 2011
  11. LOGI Stock Price Retrieved From Yahoo! Finance April 28, 2011
  12. Mad Catz Official Website Retrieved April 15, 2011
  13. Mad Catz Controller Pricing Retrieved From Mad Catz Website April 22, 2011
  14. Microsoft Pricing Retrieved From Xbox Website April 22, 2011
  15. Google Shopping Results For Mad Catz PlayStation 3 Controller Retrieved April 2, 2011
  16. Sony PlayStation 3 Controller Prices Retrieved From Sony Website April 19, 2011
  17. LOGI 2008 10K Retrieved From SEC Website April 22, 2011
  18. LOGI 2009 10K Retrieved From SEC Website April 22, 2011
  19. MSFT 2009 10K Retrieved From SEC Website April 22, 2011
  20. MSFT 2008 10K Retrieved From SEC Website April 22, 2011
  21. MSFT 2007 10K Retrieved From SEC Website April 22, 2011
  22. MSFT 2006 10K Retrieved From SEC Website April 22, 2011
  23. MCZ 2007 10K Retrieved From SEC Website April 22, 2011
  24. MCZ 2006 10K Retrieved From SEC Website April 22, 2011
  25. MCZ Form Def 14A Retrieved From SEC Website April 23, 2011
  26. LOGI Form Def 14A Retrieved From SEC Website April 24, 2011
  27. Microsoft From Def 14A Retrieved From SEC Website April 24, 2011
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