Psygnosis stays in Sony corner as Eidos bid fails to materialise

Sony has thrown away the Psygnosis for sale sign and welcomed the prodigal company back into the fold after talks with Eidos finally collapsed last week over price.

Speculation on the sale of the Psygnosis arm was finally laid to rest, with Sony deciding to keep the publisher in its stable. The move also signalled Psygnosis' heavy involvement in the software development programme for the next generation PlayStation. However, Psygnosis will continue to develop other formats, including Nintendo.

A Psygnosis representative said: 'The Eidos talks have concluded without result. We are very much part of the Sony group and will remain an independent, multi-format publisher within the group.'

Rumours suggested the deal would have resulted in Sony taking a 10 per cent stake in Eidos (PC Dealer, 12 August). But the break-down in talks has meant the San Francisco arm will lay off 40 staff due to the scrapping of two projects - Control Freak and Reapers.

Nick Gibson, analyst at Durlacher Research, said: 'Sony may decide to keep Psygnosis in the fold for PSX II development.'

He added Eidos' acquisition of Crystal Dynamics for £28.4 million earlier this year would have taken a substantial chunk out of its estimated £35 million war chest. 'Any acquisition of Psygnosis would have been problematic for Eidos due to its low cash resources,' Gibson said.

Eidos was unavailable for comment.