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Technology Stocks : eidos--maker of Tomb Raider
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To: hl who wrote (1123)7/16/1998 10:30:00 AM
From: Bleeker  Read Replies (2) of 1773
 
One area of concern seems to be an acquisition. In itself this is not
an issue of course since the industry is in the midst of consolidation
and EIDOS doesn't want to miss out. But the Psygnosis rumors may be
holding the stock down. I personally would not want to see EIDSY buy
Psygnosis, especially at a time when EIDOS is in a position to build
its purchasing power substantially. Psygnosis has 100s of employees
and a hefty price tag: absorbing all of them would be a huge charge
in addition to continuing R&D expenses.

Rage Software may be a better fit from a funding perspective. I would
hate to see EIDOS turn into an unwieldy development company like
Midway. Better to be nimble and outsource some of your development a
la THQ (which is now north of $30.) THQ has done this largely by
controlling its costs. It has zero debt and a pristine balance sheet.
Imagine how much stronger their purchasing power is now than a year
ago when it was trading near $10.

The last thing I would want to see is EIDOS issue another bond
offering to fund an acquisition. The focus should remain on +
EPS for a while in order to win investor confidence. If they
reined in their appetite to acquire for a few quarters EIDOS
would be in a much stronger position to acquire. Imagine how
much more their equity will be worth in the holiday season IF
they manage to rack up +EPS for a couple of more quarters. I
hope this Psygnosis rumor fizzles quickly and EIDOS refrains
from dropping the bomb on its future prospects with a bad
buy out deal.

Bleeker
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