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Technology Stocks : GTIS - Will it be a Phoenix or not ? -- Ignore unavailable to you. Want to Upgrade?

To: Bill Gizzo who wrote (1303)	12/9/1997 11:54:00 AM
From: RJC2006	Read Replies (1) \| Respond to of 2319

Yep, we see eye to eye but we should give them credit for getting out while the getting out was good. Let's just be thankful we own GT and not MP. Microprose is going to be facing some serious challenges here real soon. I wouldn't want to be an exec at their next shareholder meeting.

To: Bill Gizzo who wrote (1303)	12/9/1997 4:11:00 PM
From: Bill Gizzo	Respond to of 2319

"The Greenburg Article" BUSINESS INSIDER -- Why 2 Software Companies Called It Quits Getting behind the failed marriage of MicroProse and G.T. Herb Greenberg Lame Explanation of the Year Award goes to New York-based G.T. Interactive and Alameda-based MicroPose, which called off their pending merger last Friday. In a joint press release, they said, ''the time simply is not right'' for the two computer-game publishers to merge. How gullible do these guys think their investors are? Deals valued at around $250 million don't just fall apart because the time suddenly isn't right. Yesterday MicroProse's stock fell 55 percent, to $2.94 -- sharply below where it was before the deal was announced. For hints about the real story, you had to listen to separate conference calls from both companies, where it was evident that there was more to the story than meets the eye. G.T.'s spin: The deal would have hurt its earnings. However, when G.T. first announced in early October it was acquiring MicroProse, G.T. said the deal would not hurt its earnings. What changed? G.T. CEO Ron Chaimowitz won't say, other than to point to MicroProse's disclosure last Friday that it plans to report a loss and sharply lower revenues in its third fiscal quarter, which ends in January. In a press release on Friday, MicroProse CEO Stephen Race attributed part of the expected loss to expenses and lost momentum related to the merger. Race told me one reason the deal died was because of cultural differences. ''We're more conservative in our financial posture, in the way we account, period,'' Race says. Specifically, each company accounts differently for the payment of royalties to software developers. MicroProse writes them off as expenses as soon as they're paid, which results in an immediate hit to earnings. G.T., on the other hand, does not deduct these expenses until the product ships, and then it deducts them over a period of time as the product is sold. However, if the product never ships, or it's a dud, the company could be forced to take a sudden, unexpected write-off. In fact, G.T. warned in a recent SEC document that it may have to write off some of its $87.5 million in deferred royalties to software developers as part of its acquisition of MicroProse. It's not clear who walked away from the deal. However, my sources say MicroProse backed out. MicroProse shareholders would have received G.T. stock in the deal and there was some worry that the potential write-off would have reduced the value of G.T. shares. For the record, Chaimowitz said the royalty expenses had nothing to do with it. Cheers Bill Strange take, since GT was the buyer why would they change their accounting practices and have to take the write off early.The write off of $87.5 million is just about what was pared off from MPRS's share value yesterday. Not sure Race made the right decision. The west coast factor isn't a factor either.