eidos--maker of Tomb Raider Message Board

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Technology Stocks : eidos--maker of Tomb Raider

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To: Marc Newman who wrote (1228)	8/13/1998 10:59:00 AM
From: Bleeker	Read Replies (1) of 1773

Marc, clearly the slide from $22 is not strictly earnings driven. EIDOS has $1.02 trailing earnings and a P/E that is at a minimum half the industry average: quote.yahoo.com (and this is even after one-time charges are accounted for). The slide in large part reflects uncertainty over the acquisition & how EIDOS would fund it. The more I think about Sony taking a stake in EIDOS, the more I like it considering that Playstation sales are soaring in this off season. Initially, I was less than lukewarm to the idea but one of the divisions where Sony Corp. has been very profitable has been on the interactive entertainment side. Looking at FYQ1 earnings, let us take the worst case scenario from Goldman Sachs. Their estimate is -51 cents. But on a year-over-year context, even an estimate of -51 cents would drop the P/E to almost 10. That's because EIDOS reported a loss of at least -60 cents for Q1 1997. So both on an earnings and P/E basis the stock is under- valued. My point is that EIDOS has yet to be driven mainly by earnings. Rather, it's the uncertainty of the Psygnosis buyout that put a dent in the stock. If the deal is not dilutive or if Sony Corp. takes a stake and pays a fair premium above the depressed price (above the 52-week high would be fair), maybe we can rock 'n roll. The last issue I want to raise is an aquisition where EIDOS is the target. We've had two companies in the sector that have been bought in recent months: BROD and MPRS. Hasbro paid $6 a share for debt- saddled, unprofitable and bloated Microprose, who's best franchise title hardly compares to Lara Croft. Why isn't EIDOS in play when it trades at a forward P/E of 7 and a trailing P/E of 12? The company has no poision pill provision and the insiders hold more than 10% of the company's stock (1.9 million shares.) ERTS can easily make a hostile bid for EIDOS using just cash. Perhaps one other reason why EIDOS may want to pull Sony Corp. in is to fend off possible hostile bids. Bleeker

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