The video game group tends to have significant
sell-offs ahead of the transition to new
generations of consoles. I'm thinking that we
could see a large sell-off coming next summer
similar to the one in 2000. Any thoughts? I'm small short at the moment.
Wow, I also stand corrected! A very poor choice of words. I won't even try to select another one. I really just can't stand the
"in your face" actions of the homo groups. What you do in private is your business.
Adam and Eve bore children. Cain killed Abel.
"Cain lay with his wife..." Gen. 4:17. Seems like from the beginning they were all heteros.
Oh, you are also an atheist! Well, all the more reason to despise you. Otherwise, I agree with what you said. But quantity doesn't make it true. Remember Columbus?
>>>I eagerly await the "big one" where San Francisco falls off and into the Pacific. Later generations will have the legend of a strange city of homos that was once thought to exist in the wacky State of California. It was once thought that Sodom and Gomorrah were actually one and the same. <<<
Well, I'm sorry to tell you that science has debunked most of you superstitions . . . but you are free to believe anything you want.
And homosexuals exist all over the planet, getting rid of SF will not get rid of homosexuality. It has existed since the beginning of the species and will continue to exiest.
I eagerly await the "big one" where San Francisco falls off and into the Pacific. Later generations will have the legend of a strange city of homos that was once thought to exist in the wacky State of California. It was once thought that Sodom and Gomorrah were actually one and the same.
I can dream can't I? Yes, to Forest Management!
"I'm thinking that we could see a large sell-off coming next summer similar to the one in 2000. Any thoughts?"
Good question. The thing is everyone knows about that pattern so everyone is trying to out-anticipate the other. See the sell-off this time last year as an example. Now we're hearing the next cycle won't start until 2006 instead of 2005 and that's one more year of cash flow generation even if growth isn't good.
The N-Gage is a bust but PSP is a wild card and that means hype. If the hype doesn't follow through maybe there's a window in late 2004 to mid 2005 where there's minimal growth and near term prospects are weak. But online and mobile gaming will continue to grow and that presents new revenue streams and growth opportunities (and hype). ERTS will be there for online and they'll acquire for mobile.
Even if the sector doesn't grow much around 2005 ERTS won't suffer as much as the others. Some will go bust and other will lose market share but ERTS will keep on trucking. In Jan-Sep their sell-through per NPD was up nearly 20% calendar YTD and they're looking ahead to a monster Xmas. Compare that with calendar YTD growth of their main competitors:
THQI + 1.7%
Of course we know how THDO, IPLY and AKLM have been doing this year...
No-one has a chance of ousting ERTS as the leader. Not now, not in five years and extremely unlikely even in ten years. In five years are they going to be half the price of today or double the price? So you can short here and there hoping for a short term move, or you can buy on the dips and trade those instead. IMO the next cycle will last at least six years because the technical leap from the next generation to the one after that is going to be harder to justify for consumers. The longer the cycle, the better the cash flow for ERTS because they'll dominate it. No other company is as well set up to hit the ground running for the next cycle as ERTS is. Look how much trouble developers have had getting games done on time and/or on budget this cycle and it's only going to get worse next cycle. Does EA have all the answers there? No, but they know enough and they're willing and able to throw bodies at the problems until they go away. No-one else can afford to do that.
Even though ATVI has disappointed I wouldn't bet against them either until we see how this Xmas goes for them, especially True Crime. If it does well they have a top wholly owned IP to milk high margin sequels from.
TTWO I'm still extremely bearish on.
THQI I don't follow so closely but their earnings quality isn't very strong and they're still lacking in high margin wholly owned IP on consoles, which IMO should limit their valuation relative to the others. I certainly won't call them a good long term short, but they're a better option than ERTS that's for sure.
Rab, good comments. I agree with your assessment that the challenge is figuring out when the mass selling of this sector will actually begin in earnest.
"Even if the sector doesn't grow much around 2005 ERTS won't suffer as much as the others. Some will go bust and other will lose market share but ERTS will keep on trucking."
I agree with you here, as well. The only other thing I would add is that IF the selling does actually begin next year rather than in 2005, ERTS will not be immune to getting hit. During the transition year of 2000, after a suprisingly solid Mar qtr for the industry (if my memory is correct, total sales were up 6% yoy), ERTS stock price was halved in a matter of weeks once it was discovered that Sony had halted manufacturing of PS1 hardware and reallocated resources for PS2 design and manufacturing. Sure, the other players got hit even harder, but seeing a stock price get halved is still tough.
One other thing I'll point out is that during the last console transition, there was much optimism going into it that the transition would be "smoother" because PS1 was optical disk-based; there was multi-tiered pricing on software, etc. -- and for the first calendar qtr of 2000, there was certainly some evidence and reason to believe that there would be a smooth transition.
But, something always goes wrong. In 2000, Sony scrambled to redesign the PS2 for the N.A. mkt after Gates confirmed the specs and features of the Xbox. That was what caused the shifting of manufacturing resources to PS2 and resulted in the PS1 hardware shortage. Remember that the PS2 launched in Japan in early Mar (4?), 2000. Also the original PS2 did NOT have the empty bay which allows for the plugging in of a hard drive, etc. That was added for the N.A. mkt in response to what the Xbox was going to be featuring.
The console transition is tricky, and something will undoubtedly pop up and bite this sector again when the transition comes - you can count on it. The sector always gets hit hard even if only for a few months. ERTS will get hit hard, as well. In the meantime, however, enjoy the run. It's a great company.
P.S. Re ERTS' domination...
Calendar YTD US sell-through:
TTWO + THQI + ATVI = $447M
ERTS = $597M
They're outselling the *combined* major competition by 33% and I bet if you added PC sales to the mix that figure would be far higher.