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Technology Stocks : Electronics Boutique (ELBO) -- Ignore unavailable to you. Want to Upgrade?

To: Night Writer who wrote (674)	4/3/2000 9:34:00 PM
From: Mad2	Read Replies (1) \| Respond to of 779

It was hard to miss as fnco was the #2 gainer on NASDAQ today. I've breifly looked at it and it is certianly a good deal for FNCO (66% of which are insiders BTW). I don't like being negative, however let me start there and point out that fnco buys and resells used consols/games (don't know how much this is of their business). Given a transition between older and newer systems the used business will be risky and frankly in the toilet. Additionaly fnco is experiencing margin pressure. Revenue is growing but profitability slowed and then moved the wrong direction. Add to this the fact that sales leading up to Sony's fall launch will likely slow and everything points to trouble for fnco (next few qtrs). In summary this is a fantistic deal for fnco (it a testiment to buying stocks with high insider ownership.....that aren't overvalued and suffer from open market sales). All that said if there is a company that can rationalize fnco's assetts its elbo. For the 17 or so bucks, elbo gets around $.40 on the dollar of hard assets (inventory, receivables and fixtures). ELBO also gets around 1.2 per share of earnings (next few qtrs for fnco are a wild card) for the 17 bucks they're paying or around or a p/e of around 14......comparable to elbo, however depending on how elbo finnances this (ie how much leverage) I'm sure it will add to elbo's eps. Thus this deal leapfrogs elbo's traditional strategy of programed (perhaps too slow) growth in favor of presumably taking advantage of elbo's pristine balance sheet to buy the growth. I would also think that the backroom functions would be combined for savings. Near term one needs beware of dusting the cobwebs out of fnco, yet with Sony's launch comming up come Sept this deal could look fantastic. I would have liked to see elbo get a more favorable deal here, as fnco was/is headed for rocky times. At this point I'm on the sidelines and will stay there till late May. NW this is a positive from a long view. Best Regards, Mike