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Technology Stocks : Interactive Entertainment / Videogames

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To: vc21 who wrote (68)4/5/2000 1:13:00 AM
From: Schiz  Read Replies (1) of 81
Vic, my apologies for not replying sooner.

I don't feel that .38 is in the bag but if they are to make the .38 I would expect them to do it by keeping operating costs flat or slightly down and obtaining a good amount of sales in Europe. Looks like thqi passed thdo up on market cap recently but as I've said before it's difficult to compare the two because they are much more different than many would believe. The fact that thqi relies heavily on outside licenses and outside development while thdo relies on home-made brands and in-house development is enough to make comparisons very different. Among other things, thdo is growing revenues at a much greater pace then thqi. They don't have the track record that thqi does but they do have Trip and the rest of the management team. Don't forget what Trip did with EA back in the early 80's. Granted, the industry is probably not as wide open now as it was then but EA was an innovator back then and with the next generation consoles being internet capable, that really changes the landscape quite a bit. Who will have the vision to create the innovative content that will drive success 2, 5 or 10 years from now?

I don't feel that luck has anything to do with thdo breaking even this year. They would have to miss the numbers by quite a large margin to not make a profit in fy00. As far as warning, you are assuming they won't make the numbers. It seems obvious by the recent action in the stock you are not the only one that feels this way. I don't think whether they come in a little over or under the q4 estimates has much relevance in the big picture. I'm more interested in what they've got cooking for the ps2 and their internet plans.

You are looking at the math in the worst possible light. You need to realize that an increase in revenues due to more games released doesn't correlate directly with operating costs. A very large portion of their operating costs in the 3rd quarter were from television ads. I would expect this to be lower this quarter. I would think it might be low enough to offset increased development and g&a costs. NPM of 3.4% when you are growing revenues at 200%+ is not paultry!

We will know the fy00 results in early May. Until then we'll just have to wait.

If we don't go any higher before earnings are announced I wouldn't be entirely surprised to see the stock trade up after earnings even if we miss the numbers. The future is much more important than last quarter.

You said "I just don't get it. Please explain what I'm missing."

I've been saying that about yahoo for years. Too bad I wasn't buying instead. I'm not saying that thdo will rise anywhere close you yahoo. My point is that stocks that appear over valued tend to stay that way, especially if they are that way for an extended period. Sometimes the value is not immediately evident. I think it's likely (obviously there are no guarantees) that the biggest reason thdo is down is the weakness in the overall market and the sector itself. This could be a real buying opportunity here. Although there are what appears to be other buying opportunities within the sector as well. Currently I really like thdo and atvi. ttwo and thqi are worth looking at but I don't watch ttwo that closely and I'd like to know more about royalties associated with wwf and if the capitalized software costs on the balance sheet are real for thqi. erts tracks the overall market much closer than anyone else in the sector so it's a little scary from that standpoint but the aol deal seems real promising and we could see a considerable pop with hype surrounding the launch of I guess iply might work as a crap shoot. I wouldn't touch aklm with a ten foot pole. gtis I don't pay much attention to. mwy is kinda interesting. Probably second as far as tracking the market but I'm not crazy about the arcade business in general. I would think it's much more susceptible to a downturn in the economy.

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