Virgin Interactive Appears Behind in Game Plan for IPO

Will Virgin Interactive ever go public?

For the last two years, the Irvine computer game company has steadily bled money. In a recent regulatory filing with the Securities and Exchange Commission, Virgin’s parent company--Spelling Entertainment Group--said the game company lost $49.5 million for the nine months ended Sept. 30.

Last spring, Spelling Entertainment announced plans to spin off the game maker to the public by the year’s end, even though Spelling estimated it will cost about $139.5 million to dump Virgin.

Now, the clock is ticking. To date, Virgin has yet to take its first official step toward going public--filing a preliminary prospectus.

Spelling officials insist they are “on track to divest” their majority interest in the game company. Yet analysts insist that Wall Street’s reception of the troubled Virgin is questionable, given the company’s continued losses and moderate sales.

“Virgin has probably used up all its potential goodwill with Wall Street,” said Dan Lavin, analyst with the technology research firm Dataquest. “Though this [spinoff] could fly, this could be the least-hyped IPO in recent history.”

Game experts say the real question is whether new leadership can turn the struggling game maker around.

A lot of that pressure rests with Brett Sperry, founder of Westwood Studios, a unit of Virgin. The Las Vegas game firm, makers of the wildly successful “Command and Conquer” series, remains the jewel of Virgin’s troubled world, analysts said.

Last spring, Sperry quietly became president of worldwide publishing for Virgin. He spends one day a week in his Irvine office.

Officials at Virgin insist Sperry is helping the struggling company claw its way back to breaking even. They note that, in an effort to streamline the company, Virgin has cut about 55 positions from its 175-person headquarters in the last year. The company also killed about 40% of its projects--those that didn’t look like sure-fire hits--at the development phase, officials said.

“If Brett can turn Virgin around even a little bit, Spelling may be able to carry off the IPO and appeal to wide-eyed investors who want a piece of the entertainment business and are willing to ignore the past,” said Johnny Wilson, editor of the trade magazine Computer Gaming World.

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P.J. Huffstutter covers high technology for The Times. She can be reached at (714) 966-7830 and at p.j.huffstutter@latimes.com