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Strategies & Market Trends : Rande Is . . . HOME -- Ignore unavailable to you. Want to Upgrade?

To: BANCHEE who wrote (16704)	12/14/1999 2:12:00 PM
From: BANCHEE	Respond to of 57584

Here is an article about video gaming stocks Analyst Corner Video game stocks rack up the points Analyst sees even better scores for the upcoming year By Colleen Bazdarich, CBS MarketWatch Last Update: 3:28 PM ET Dec 10, 1999 Personal Finance News Join the discussion NEW YORK (CBSMW) -- Been wasting a lot of time playing video games? Here's your chance to make your bad habits work for you -- shares in electronic game stocks having been racking up the points lately, and analyst Edward Williams at Gerard Klauer Mattison & Co. says they should just score higher next year. After all, you know what Y2K brings don't you? No, we're not talking crashing computers, floods and riots. Y2K is all about Sony's Play Station II. No doubt the long-awaited release of the new console will be lifting the spirits of playful boys everywhere. It should send stocks soaring in the American companies that supply the software, as well, Williams told Colleen Bazdarich of CBS.MarketWatch.com. CBSMW: How have the gaming stocks been doing lately? Williams: The stocks have been performing phenomenally. CBSMW: Can you give me the reasons for that? Williams: There are several main reasons for it. You have the upcoming launch of Sony's (SNE: news, msgs) PlayStation II and the recent launch of Sega's (SEGNY: news, msgs) Dreamcast. You also have a strong market acceptance of the PlayStation console -- Sony indicated on Friday that they have sold 70 million consoles worldwide. I believe that they are targeting to be in one out of four North American households by the end of this year. Plus, there is continuing strong sales with the Nintendo (NTDOY: news, msgs) 64 console and sales on the PC software side. CBSMW: Now, from what I understand, the Play Station II will be different from its predecessor in terms of how it handles software. How will this affect the companies? Williams: The console software sales is a very cyclical business. It will typically pick up dramatically somewhere around the third or fourth year after the console has launched. Sales usually drop off precipitously right after that peak. The reason for the drop-off is market anticipation of the next console system. Rather than spending an extra $50 on a game for a console that is outdated, consumer tends to hold on and wait until more games become available on the new hardware. What is different this time around is that Sony's PlayStation II is a backward compatible system. Consumers will be able to play old PlayStation games on the new console. That should effect sales positively. CBSMW: And who are the specific companies that make software for PlayStation? Williams: There are a large number of them. Just to highlight a few -- the ones that we cover are 3DO Company (THDO: news, msgs), Activision (ATVI: news, msgs), Electronic Arts (ERTS: news, msgs), Acclaim (AKLM: news, msgs), Midway Games (MWY: news, msgs), THQ (THQI: news, msgs) and Take-two Interactive (TTWO: news, msgs). CBSMW: Do you have any picks? Williams: We only cover cover these seven which are the dominant players in the market. We do have "buy" ratings on all the stocks. Most of those stocks have performed very well in the last few months. CBSMW: Are there any that are at lows right now, or at a particularly good price? Williams: Let me put it this way -- on Sept. 8 I officially picked up coverage of Activision, EA, Midway and THQ. Since that date, THQ is up around 78 percent. Midway is up 51 percent, EA is up 44 percent, Activision is up only about 4 percent. Accordingly, Activision is probably one of the ones that has not yet moved that represents an opportunity. I think that the same can be said for Take-two and 3DO. CBSMW: How are these companies going to look for the holidays? Williams: The December quarter is definitely a very important quarter for the space. For frame of reference, it will represent somewhere in the 35 to 40 percent of annual revenues. That's a ballpark figure. It is definitely a very important important quarter. CBSMW: Investors should be watching? Williams: They should be paying attention to earnings, to how sales are occurring, which games are popular. You can almost do this anecdotally and go to stores and see which are the hot sells. Get a flavor for which ones your kids and your kids friends want. CBSMW: What kind of trends in gaming software are we going to see for the next year or so? Williams: If we look out longer term, what makes the whole group exciting is several factors. One is that Microsoft (MSFT: news, msgs) is rumored to be coming in as a console player. You currently have Sega, Sony and Nintendo. So there is great potential in Microsoft entering. And additionally you have the Internet. Ultimately these companies will be publishing these games for the PC, for several game consoles and for the Internet. CBSMW: AOL is offering online gaming now, right? Williams: What happened is that Electronic Arts and AOL (AOL: news, msgs) have established an agreement that will make EA the exclusive provider of games to AOL. There will be an EA button that takes you an EA and AOL game site. I think that we will see a lot more of this in the future. Many of the ISP and the Web portals are trying to create "sticky" Web sites. Games are a great way to make a Web site "sticky" -- another way to keep people on your site for longer. Which of these publishers can benefit from a relationship with these Web portals? The answer to that is that they all can. Which ones can be targeted? A few of them. These are macro reasons why the industry so exciting. CBSMW: Well, are there any risks that investors should think about before getting in? Williams: It is a volatile group and I think that is one of the bigger risks. Outside of that it is very important to remember that you are dealing with a very fickle consumer and you need to make sure that the management in the company you invest in has the ability to lead the company through that marketplace. Colleen Bazdarich is a personal finance reporter for CBS MarketWatch.