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Non-Tech : KIDE a good play to capitalize on Pokemon craze -- Ignore unavailable to you. Want to Upgrade?

To: trung nguyen who wrote (437)	9/23/1999 1:39:00 AM
From: Kevin McKenzie	Read Replies (2) \| Respond to of 1239

The lawsuit is important in one respect in that it gives us a ballpark estimate of KIDE's revenues from Pokemon related products -- $50 million. The suit says Nintendo's U.S. revenue from Pokemon-related products is expected to total $1 billion this year, with $225 million for Wizards of the Coast and $50 million for 4Kids Entertainment. Assumming KIDE's net margin of 26% continues, this implies earnings of about $1.20 for Pokemon products alone. This doesn't include earnings from other licenses. Every additional $1 million in sales adds about 2 cents to KIDE's earnings (again, assuming net margins of 26%). It may not be fair to assume the net margins will remain at 26%. They may increase substantially due to economies of scale. For example the net margins for the three month period ending June 98 were only around 5%, whereas the net margins for the most recently reported quarter were 35%. It's probably safe to assume net margins of at least 30% for this year, which would yield earnings more like $1.35 on $50 million of sales. I personally think the estimate of $50 million is low. I think the Pokemon movie to be released in November will be wildly popular in the U.S. (It was the sixth highest grossing movie in Japan in 98). I also don't think the revenue estimates accurately reflect sales of Topps cards and other non-game card type items, such as candy, stuffed animals, school supplies, art supplies, books, etc. But that's just a wild guess on my part. I also think that KIDE will benefit by being awarded licenses of other "hot properties" in the future, due to their masterful handling and promotion of Pokemon. From what I understand, when KIDE obtained the worldwide licensing rights from Nintendo, many industry experts felt Pokemon was a longshot to make it in the U.S. They felt that the role-playing aspect really didn't appeal to U.S. children the way it did to Japanese children. So Pokemon's success wasn't exactly a foregone conclusion. I bet other companies will recognize this and choose KIDE to promote their properties.