I wouldn't look for the board of directors or management to take this company private within themselves.
BBY and GME are very different in many ways. BBY is going private through a bid by the founder who owns a little over 20%.
BBY got f'ed by their overhead. Look at 3/4 of their store being allocated to appliances, tvs, and pcs. Add a crappy housing market and the rise of appl. The other 1/4 vg and dvds. Where gme and nflx ate their lunch. GME does not have nearly as high an overhead, they always have the smallest Sq ft in every mall and strip mall and are staffed by 2 ppl on avg.
If gme goes private it will be through private equity. I would look to KKR who has pieces in Toys r us, dollar general, and other retailers.
I would not count on the next console cycle adding much juice to the industry. The old consoles didn't have online gaming and mobile gaming to compete with. Now they do.
People have shifted their gaming time to these other non console type games. I have witnessed my own son who used to be die hard Xbox, PS3 and Wii user almost completely stop using any of these consoles. What does he play now? PC games like Minecraft and LOL. iPad and iPhone games. Other online games. Sure he very rarely fires up some COD but that is < 5% of his gaming time now whereas consoles used to be 100%.
The new consoles will likely fall flat as consumer disinterest in them continues because good enough free games exist on other platforms. Disruption is here. GME is in a dying area and their digital initiatives while good won't be near enough to offset the massive fall in consoles and console software
Rich, if your analysis is accurate, what do you anticipate for earnings next year? The effect of a massive exodus from GME type products should show up in 2013. Are you saying they are going to show a yearly loss? The lowest analyst estimate for 2013 is $3 a share. That's the lowest. Now, I know analysts are mostly incompetent, but they would have to be beyond incompetent, and more along the lines of brain dead to be predicting $3 a share when the company may actually lose money? I'm interested in your take because assuming GME makes just 66% of the LOWEST estimate, that's $2 a share, which would justify a $20 price easily. I just think anyone shorting this stock at these levels is in for the long term (years, not months) and agrees with your analysis that the company will be losing money by 2013.
Although someone could probably pickup the company for $25 a share tomorrow, there are other points to support the view it's just not worth it when you can eventually get it for $5. a) Refurbish, games once the bread and butter of company is now transitioning to tablets and other electronics which they hope to have higher margins, however long term won't trade at 2% of the same frequency so it eventually dies with over stocking of used electronics they can't sell for the prices they want. b) Unemployment, Games are considered over indulgence by these folks now and they'll make sure the next generation learns the value of savings vs paying for entertainment. c) Digital, Although their Spawn labs would be a huge success once everyone got FIOS or Uverse, the Telcom's are not going to rewire the planet for 10+ yrs and Cellular Data Plans will be too costly till that occurs otherwise.
In the end, they will survive as a much smaller company like Half Price Books with a few, much larger stores and larger used inventory selection.
@ rich the PS 3 and xbox 360 both have had online digital stores throughout their entire life cycle. Portable gaming has been around almost as long as consoles see gameboy, sega game gear, ps portable, et. al. GME has done fine.
The vg game industry is cyclical. I would like to be in before the release of the wii u this holiday season, followed by GTA V in the spring, and it seems like a msft employee has leaked that a new xbox is on its way.