GameStop shares fall on Sony patent application
GameStop shares fall after Sony files patent application for tech that would block used games
NEW YORK (AP) -- GameStop shares tumbled Thursday, after Sony filed an application for a patent for technology that would block used games.
THE SPARK: The technology in question would encode each individual game so that only the original buyer of the game could use it. As a result, computer game retailers like GameStop Corp. wouldn't be able to resell used games.
THE BIG PICTURE: There has been speculation before that Sony Corp. might try to put this kind of technology on its next gaming system.
But analysts said the move could cause problems for Sony, because it would put its gaming platform at a competitive disadvantage, eliminate its revenue from game rentals and possibly result in a consumer backlash.
THE ANALYSIS: Janney Capital markets analyst Tony Wible said news of this kind of technology emerged in 2005 before the launch of Sony's PlayStation 3 and sent GameStop shares tumbling. But the technology never appeared, showing that Sony knew that blocking games would be damaging to its business.
"We believe today's selloff is another buying opportunity ahead of a new console cycle and ramp of new lines of business," Wible, who backed his "Buy" rating for the stock, wrote in a note to investors.
THE SHARES: Down $1.57, or 6.1 percent, to $24.09 in afternoon trading, after dropping as low as $23.92 earlier in the session. Over the past 52 weeks, the company's shares have traded between $15.32 and $28.35.
