I listened to the CC. It wasn't as bad as I thought. GTIS has put a hold on their move to LA. At least until their recap plan is completed. Possibilities include, merger, partner, sale of all or in part. They have identified several candidates they are interested in and Bear Stearns will be sending information to these companies within the next week or so. They have enough cash and financing resources in place to get through the xmas selling season. They project Driver and TA alone will generate $45M in revenue in Q1, FY,00. Will realize approx. $6-7M in cash from sale of OneZero and they are currently in negotiations with a potential buyer. OneZero was too much of a cash drain and this mgt. is extremely focused on regaining profitability and recapitalizing the balance sheet for growth opportunities. Cannot compete for prime properties with current balance sheet. Head count at 3/31/99 at 1600. est. head count at 3/31/00 will be <1000. Eliminated 2 1/2 studios. reduced R&D from approx. $125M run rate to $65-70M. New CFO brought in to increase working capital and cash flow. Q2, FY 00 we will see the release of Unreal Tournament and DukeNukem, N64. Est. growth in Children and Liesure products 30-50%.
Will lose MSFT distribution to Wal-Mart but they have Warehouse stores, Office Supply stores, K-Mart, Shopko and others.
My post from AOL:
Subject: Re: GTIS for sale
Date: Wed, 30 June 1999 03:02 PM EDT
From: Bonzo3
Message-id: <19990630150236.18287.00005956@ng-ft1.aol.com>
Ranney, THQ should be getting a package by the end of next week from Bear Stearns regarding interest in partnering, investment, merger or outright sale, of all, or some, of GTIS (Recapitalization). GTIS has identified several possible merger or investment partners, or acquisition suitors, and my bet is *THQ is one of them. If THQ is interested it would not be for the entire company - too much debt. I would guess that THQ would mostly covet Humongous Entertainment and possibly Wizard Works, their Leisure Games studio; Deer Hunter, Bass Fishing etc. GTIS is a classic case of the the sum of the parts being worth more than the whole - a lot more. Their problems are not a result of present management; Heymann et al, but previous mismanagement; Chaimowitz. My feeling is THQ will not offer enough for GTIS prime studios but someone such as Hasbro or Mattel will.
Humongous is a nice fit for an interactive/toy company. Midway should flat out buy GTIS front line publishing business for Driver, Total Annihilation, Unreal and DukeNukem (Cavedog Ent., Reflections). If not ERTS might. Regardless, in spite of a rather poor balance sheet, there is a lot of underlying value in GTIS, and as long as they do not reverse split (not this year), I don't see it going as cheaply as Microprose did. All in my opinion.
* Possible Candidates:
> Hasbro
> Mattel
> Midway
> Electronic Arts
> THQI
> Foreign Multi-Media co.
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