Blow for Argonaut as Malice and Orchid are canned

UK developer Argonaut has been hit today by the cancellation of publishing deals for two key titles, Malice and Orchid, while poor retail performance of Kung Fu Chaos has prevented the commissioning of a sequel.

In a trading update issued to the City this morning, the development group revealed that Vivendi Universal Games has decided not to publish Malice and has returned all rights to Argonaut. The game - touted as one of the most impressive on the Xbox prior to the launch of the console - was recently delayed again by a gameplay redesign.

Vivendi has apparently decided against publishing the game after an assessment of its own line-up, which includes a number of character-focused games, and has offered assistance to the developer in finding a new publisher for the title. However, although Argonaut does hope to find a new deal for the game, it is not expected that this will happen before the end of the financial year (July 31st).

A second blow comes with the cancellation of Argonaut's original title Orchid, which was to be published by Namco Hometek. According to the developer, after discussions with Namco the two companies "have concluded that the potential returns on this title do not justify the additional investment required to complete the game" - resulting in an outright termination of development on the product.

A lesser but still unfortunate footnote to these events is the retail failure of Kung Fu Chaos, the quirky Xbox title which was developed by Argonaut's Just Add Monsters studio and published by Microsoft. Although it received significant critical acclaim, the game simply didn't shift any units at retail, and as such Microsoft has not commissioned a sequel, leaving Just Add Monsters working on a new game instead.

Argonaut's other publishing deals with Vivendi and Namco - for SWAT: GST and I-Ninja respectively - remain unaffected by these cancellations, and both of those titles, along with the Bionicle title being developed for Lego, are now in the late stages of development.

However, the cancellations will have a significant effect on the company's figures for the year, particularly because most of Malice's advance was payable on the completion of the game. Despite this, Argonaut expects to have a substantial cash balance at the end of the year (its present balance is £7.2 million). However, a review of the cost base of the studios is in progress - no word on what measures may be taken in this regard, but given that it comes as a result of project cancellations, a reduction in headcount must be considered a possibility.

At time of writing, shares in Argonaut had fallen 26 per cent on the news.