Best Week, Worst Week: Md. video game maker scores big win; Under Armour takes several hits

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A Maryland video game maker won’t be getting many “likes” from a Facebook subsidiary after winning a $500 million copyright infringement lawsuit, while slow fourth-quarter sales, a shakeup in upper management and a devaluation of its credit rating had Under Armour looking to hit the reset button this week.

The Associated Press reported Wednesday that the lawsuit filed by Rockville-based ZeniMax Media against Facebook subsidiary Oculus VR revolved around an area of the law that typically doesn’t draw a lot of attention, except when Facebook CEO Mark Zuckerberg, one of the world’s richest men, testifies.

Though the jury rejected allegations that Oculus stole trade secrets from ZeniMax, it did find violations of copyrights, trademark and contractual laws. Had Oculus lost on all the issues raised in ZeniMax’s allegations, it could have been slapped with $2 billion in damages.

The verdict further raises the in-effect cost of Facebook’s acquisition of Oculus. The social media giant paid $2 billion for the virtual reality company two years ago plus another $1 million to retain and motivate Oculus workers.

Meanwhile, it was a rough week for Baltimore-based sports apparel maker Under Armour. Company CEO Kevin Plank conceded Tuesday the company was “out of balance” in the fourth quarter as the company released less-than-expected earnings and announced it had lost its second CFO in a year.

Business writer Anamika Roy reported Tuesday that Under Armour’s fourth-quarter net income of $104.9 million and profit of 23 cents per share did not meet analysts’ projections. The company then had its credit rating cut to junk status Wednesday by S&P Global Ratings, which cited heavy competition and pressure on prices.

Plank attributed the flat earnings to slowed sales in North America at the end of last year. The region is the largest revenue driver for the company, making up 85 percent of the business. To get back on track, Plank said, the company needs to focus on being a premium brand that pairs performance with fashion. In a move to help kick-start U.S. sales, the company on Monday released its first collection of apparel made in the United States, manufactured at its Lighthouse facility in City Garage at Port Covington.

Slow sales prompted S&P Global Ratings on Wednesday to lower Under Armour’s corporate credit grade and the rating on its $600 million of notes to BB+ from BBB-, putting it one notch below investment grade. It also released a negative outlook on the corporate rating, citing heavy competition and pressure on prices.

S&P pointed to concerns that Under Armour sales will slow over the next two years and that “margins will weaken due to intense competition in North America, a shift in growth toward less-profitable international markets and the athletic footwear segment.” The brand’s expansion plans, which include a big push overseas, also are driving up costs, the ratings firm said.

The junk rating deals a blow to a company that sold the notes this past June in an inaugural deal. The bonds plunged 4.2 cents on the dollar to 88.1 cents, the biggest drop since they were issued.