Mad Catz Interactive Inc (NASDAQ:MCZ)

On June 15, 2011 we removed MCZ from the GeoSpeicial List @ $1.63

Initial position taken on February 10, 2011 @ $1.46
Added to the GeoSpecial list on February 14, 2011 @ $1.46

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Catalyst: Fiscal 2011 third quarter quarter financials appeared to exhibit a break out scenario..

Current road block: Company operates in an industry where consistent EPS growth is tough to come by; Fiscal 2011 Third quarter EPS turned out not to be a break out quarter.

Peak performance: Reached a high of  $2.39  on April 4, 2011.

For the fiscal fourth quarter ended March 31, 2011, Mad Catz reported

• record net sales of $33.7 million, an increase of 28.3% from $26.3 million in the fiscal 2010 fourth quarter.
• Gross profit for the March 2011 quarter rose 48.7% to $10.5 million, compared to $7.1 million in the same quarter of the prior year.
• Gross profit margin for the fiscal 2011 fourth quarter was 31.2% versus 26.9% in the same quarter a year ago.
• Total operating expenses in the fiscal 2011 fourth quarter rose 41.0% to $8.9 million and the Company recorded operating income of $1.7 million, an increase of 109.9% from the $0.8 million generated in the comparable prior year period.
• Foreign exchange gain for the fiscal 2011 fourth quarter was $1.2 million compared to a gain of $0.1 million in the fiscal 2010 fourth quarter. Reflecting a tax expense of $0.8 million, the
• Company reported net income of $1.5 million for the quarter ended March 31, 2011, or $0.03 per diluted share, versus net income of $0.8 million or $0.02 per diluted share in the prior year fiscal fourth quarter.

Commenting on the results, Darren Richardson, President and Chief Executive Officer of Mad Catz Interactive, Inc., said, "We are very pleased with the continued momentum, growth and improved diversification of our business. With another year of record sales and profits, fiscal 2011 results validate the strategic and operational initiatives undertaken over the past few years. The Company’s ability to grow both the top and bottom line – particularly in the face of a challenging industry and consumer environment – reflects our focus on premium and distinctive interactive entertainment products.

SAN DIEGO, Mar 01, 2011 (BUSINESS WIRE) -- Mad Catz(R) Interactive, Inc. and Electronic Arts Inc. (NASDAQ: ERTS), a leading global interactive entertainment software company, announced today an agreement to produce branded PC and console videogame accessories based on 'The Sims(TM)' franchise. The agreement grants Mad Catz non-exclusive rights to produce and market a wide range of videogame accessories for PC, Microsoft(R) Xbox 360(R) video game and entertainment system, Sony(R) PlayStation(R) 3 computer entertainment system, Wii(TM), Nintendo DS(TM) and Nintendo 3DS(TM) systems.

Commenting on the agreement, Darren Richardson, President and Chief Executive Officer of Mad Catz, "We are excited to work with EA and one of the most popular gaming franchises of all time. The Sims is a new and exciting opportunity for Mad Catz to reach a wider audience that includes both casual and enthusiast gamers. Our agreement with EA is part of our long-term strategy of working with the premium gaming brands and deliver innovative consumer focused accessories."

On February 10, 2011 we nibbled on shares of MCZ @ 1.46

MCZ reported an explosive fiscal 2011 third quarter that saw sales increase 90.6% to $93 million and EPS rise 61.1% to $0.15. We have been following this stock for a few years, observing that EPS consistency has been a problem. In fact, this can be a common problem in MCZ market sector. We do not expect the next few quarters to match the third quarter’s financial performance, which is typically the company’s strongest spurred by holiday spending. However, the company has indicated that it will finish its March fiscal year on a very positive note:

Commenting on the results, Darren Richardson, President and Chief Executive Officer of Mad Catz, said, “We are very pleased with the record results for the fiscal 2011 third quarter and fiscal 2011 year-to-date periods. As we continue to execute on our initiatives to re-position Mad Catz as a provider of premium products that enhance the gaming experience, we remain focused on further leveraging our manufacturing and distribution capabilities and aligning ourselves with key titles. Our line of Rock Band 3 peripherals and Call of Duty: Black Ops products, both of which met with strong consumer demand, are great examples of this alignment with the industry’s biggest franchises. In addition, we enjoyed great success with Tritton Technologies, our gaming audio line acquired in early fiscal 2011. These, along with our highly acclaimed Cyborg pro gaming mice, provide us with the strongest product portfolio in Mad Catz’ history. In addition, our strategy to focus on premium products has resulted in three consecutive years of year-over-year growth in third quarter and nine month net sales, gross profit, earnings, EPS and EBITDA results.

“Reflecting the excellent fiscal third quarter retail sell-in of our range of products, we ended the quarter with $9.9 million of cash, $51.2 million of accounts receivable, $32.5 million of inventories and accounts payable of $55.3 million, including the outstanding balance under our bank loan. We expect significant improvements in our fiscal 2011 year-end balance sheet, including a positive cash position net of bank borrowings, and believe our strengthened balance sheet will allow us the financial flexibility to further grow sales, earnings and free cash flow while pursuing other means to enhance shareholder value.”

Mr. Richardson concluded, “Looking ahead, we continue to actively build and roll out a diversified pipeline of exciting products, such as the recently announced audio headset partnership with Microsoft, the Marvel vs. Capcom Arcade FightSticks for the Xbox 360 and PS3, and the range of accessories for Gears of War 3. Building on what was a great holiday quarter, we are confident in our positioning for the fourth quarter of fiscal 2011 and fiscal 2012 as a whole.”

We will attempt to interview MCZ and code the stock as GeoSpecial with a short-term target of $4.25