You have a way with copying only those words that you can latch on. You must also be reading the headline instead of the news.
No one claimed MSFT will become the #1 or #2 in the game box business. They are introducing an entirely new paradigm shift to the game box business. Yes, they will be #3 or maybe a distant #4, but they will impact the profitability for the rest of the sector.
ATVI and THQI and also ERTS live on high royalties. Their profitability is insignificant at best. Their sales are going on, but no major improvement on profitability.
Here's something: the headline reads "THQI reports record revenue with 144% increase in net income"........... When you read this, you are most likely to go out there and buy it. Then you move down to the net income line in their earnings report, you see the net income for the first 9 months at $7.5M. You see it depends on what you read.
All I am saying it, the formula adaopted by the analysts for this sector has just changed. The reasons are:
- Weak sales in 4th will cause most of the game software companies to miss estimates, contrary to what you hear from the CEO's
- xBox will slowly move the thinking about the uses of game boxes (8 GB harddisk in a gamebox? Hmmm!)
- All companies are offering more of the same on the same multi-platform level
- Competition will be intense because of many players selling similar products. Differentiation is weak, so the consumer will go the best price
- The game software companies are continuously trying to buy up new studios that make popular games. With the secondary offerings all but pulled back, AVTI and THQI don't have enough cash to buy up companies. This will hurt more than anything else. ERTS traditionally relied on signing up popular personality. Costs a lot of money.
- EA.com is a necessary evil for ERTS and won't go away. It is defensive move against MSFT and its only chance to protect its position. Otherwise, the popular characters will just move to MSFT.
- MSFT has no skin in the game and can play this market anyway they want it.
- Raising guidance before a company's strongest quarter in a year doubtful year is just plain stupid. No one will buy it.
The list goes on!... That's why, I repeat again, I am bearship in this sector until we figure how these companies will fair. I might change my opinion later, but past performance does not garauntee future results.
> So, you're telling me that MSFT will be ineffective competing in this space. Make me laugh!...
It's not just Rab saying that, just about anybody that has been in this industry for more than 5 years would agree. If you want to see quotes, just ask (or read the news).
> I suppose you don't think MSFT could throw...say..$500M to get a foothole in the door
Microsoft has already committed to $500M in marketing the XBOX. You're naive (as are they) to think they can compete with the PS2 and GameCube. By this time next year, they will be a distant #3 seller in console hardware. Short-term(next 6 months), though, they will probably sell all the XBOX's they can make, if that's any consolation.
Please do provide more details, I'm interested. Btw I haven't been long ERTS since last year, I've been shorting it since then but have no position right now. Also currently long TTWO and AKLM for the next few months.
Seems like we agree on two things: it'll cost Microsoft a huge amount of money to succeed, and eventually they will. But if a large part of your betting on MicroSoft is online content and broadband support is still niche then how will they do this? I just don't think Microsoft being #1 will happen until the next hardware round if at all, and in the meantime ERTS (minus EA.COM), ATVI et al will do very well, though I don't rate the chances of survival for most of the other publishers a few years from now.
Thanks for your input.
> MSFT is up in AH....
That's because they announced .43/share (before a one-time .20/share charge) versus .39 estimate.
THQ reported strong results today, ATVI yesterday. That will put on ERTS to beat estimates I would think. I wonder how much EA.bomb will suck suck suck from otherwise good earnings?!?!?
***I wonder how much EA.bomb will suck suck suck from otherwise good earnings?!?!?
How do we rectify this situation, JR? Perhaps, some staff reduction on that side is in order, and at least will blunt the fall.
How big is the EA-com workforce?
THQI, that explains for today's strong close.