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Star Wars Disaster Dumps DK Earnings
Jean Richardson -- 1/31/00

Just when U.K.-based illustrated book publisher Dorling Kindersley seemed to have turned the corner, it was dealt a blow by its Star Wars properties. DK sold about three million copies of its Star Wars spinoffs this past year, but the house vastly overestimated demand for the licensed property and now finds itself stuck with 10 million unsold copies and a pretax loss of £25 million ($41 million) for the six months ended December 31, 1999. In the wake of the loss, there have been reports in the financial press that company is considering offers to be bought.

DK acknowledged that it had "misjudged" its investment in Star Wars books and in pre-Christmas promotional expenditures. DK chief executive James Middlehurst abruptly left the company shortly after word of the loss was announced. DK founder and executive chairman Peter Kindersley said he will manage DK until a new chief executive is found. He declined to comment on Middlehurst's departure. Kindersley acknowledged that the fiasco showed a serious lack of judgment and accepted responsibility. He also held out hope that sales of Star Wars titles will pick up with the video release of Episode 1: The Phantom Menace in April.

Provision will be made for the £14 million worth of unsold Star Wars stock and £5 million of other stock and works in progress. DK will ask its bankers to increase its borrowing above the current £45 million limit. DK's stock market value plummeted by more than 40% at the news of millions of unsold titles.

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