Some thoughts on EIDSY
First of all I want to point out, that I've currently no position in EIDSY stock. Even after the latest pull back the stock looks overvalued to me regarding that until Xmas they will likely post poor results. On the other hand I still have a lot of respect to EIDSYs management team and their good product pipeline, so I will never short this stock.
Now, I'll post some aspects about EIDSY, I don't like particulary:
- Sales of TR3 are declining faster than those of TR2 or TR1 in previous years. For PCs this product is currently at #14 in sales at Germanys biggest retailer Media Markt (Eidos Interactive Germany does 45 % of it's total business with this costumer alone).
- The introduction of TR2 Gold at a budget price range comes too late for me. EIDSY would have done more business if they launched TR2 Gold in the month of March to participate in strong Easter holiday sales. The current scheduled launch in the month of June comes in one the usualy weakest periods for entertainment software sales.
- For TR4 EIDSY definetly needs more innovations. As a TR-fan I personally want to see more of Lara's adventures and will buy every part of this software series regardless of innovations, but EIDSY also needs to attract the mass market. If TR4 is "just" another version of TR2 or TR3 with the only innvation is a better graphic engine, if've my doubts that this product will be a smash hit. Of course it will sell "well", but just "well" is not enough. EIDSY needs sales of more than 5 mill. copies to sustain it's strong earnings. The biggest critict point of the TR-series so far is the weak story line; Core Design has to improve this...
- The next product of Looking Glass after "The Dark Project" called "System Shock 2" will be published by ERTS instead of EIDSY (It's the same with the upcoming "Final Fantasy 8" from Squaresoft).
- Ion Storm still is a problem for EIDSY. It's unclear when Daikatana finally is ready for sale and if EIDSY will be able to get back the 20 mill. $ in advance payments it has already made to ION storm.
- EIDSY has to put more focus on their cost basis. As a example the payments to the board of dirctors (excluding share options) in 1996 was
437,000 GBP, in 1997 it was 788,000 GBP and in 1998 it was 3,363 GBP.
- It's also unclear if the aquisition of Crystal Dynamics is accretive to earnings. EIDSY paid 42 mill. $ from it's cash reserves for Crystal Dynamics.
- With the current add-on to "Commandos" from Pyro Studios, EIDSY has a good product on the shelf. "Commandos 2" will also be published by EIDSY. It's unclear which company will publish the following products from Pyro. Now as an established developer, Pyro is likely to demand a bigger portion of sales for it's upcoming products than with Commandos (which was their first program ever).
It would be nice, if somebody who's going to the E3 will post his impression of EIDSYs products here at SI (I personally would like to be at the E3 myself, but travelling all the way from Germany to L.A. is just too expensive and costs too much time for just attend a trade show) :-( Anyway, any feedback is welcome: perhaps EIDSYs outlook is better than I think.
Greetings,
Kai
P.S.: I've excluded EIDSYs 15 % stake in Opticom AS from my analysis.
Opticom is a great technology company and has still potential, so I own a position in Opticom AS as well as in Fast Search And Transfer AS (55 % owned by Opticom) via a 4 to 1 spin-off from Opticom in 1998. This investment is positive for EIDSY, but for an individual investor it's better to own a direct stake in these companies than to invest in EIDSY. Trouble is that these Norwegian companies are so far not listed in the US. |
