John,
You suggested a potential ATVI/MPRS combo. I suggested a BROD/ATVI combo. But the rumor on the MPRS/BROD combo is worth looking into. As I mentioned in my post, BROD's pipeline is a wasteland. Check out their homepage: broderbund.com. They've got nothing big except for Riven, PrintShop, 3-d architect, Carmen Sandiego, MYST and JPIII. Some kid games....but not much else.
The problem with BROD is that even though Myst and Riven are huge...[personally I tried the JPIII demo and thought it was more engaging than Riven (I got that recently), but I don't think it will sell nearly as well]....they're already out and BROD doesn't have anything else to replace them when sales eventually ebb. Which is why I thought ATVI had a lot to bring to the table.
An ATVI/BROD would create an extremely strong
entity...edutainment (Carmen Sandiego, Cat in the Hat), action (Heavy Gear, Battlezone, Hexen II, I' 76), adventure (Zork, Riven, Myst, JPIII), strategy (Dark Reign, Battlezone), consumer (PrintShop, ClipArt, 3D-Architect, etc), puzzle (Shanghai).
Financially, you get a company with 41 million shares outstanding, an outstanding balance sheet (both companies have good balance sheets)
and synergy.
BROD brings edutainment, consumer, adventure to the table. ATVI brings action, strategy, adventure and puzzles.
Overlap....significant in the distribution arm. Lots of excess to be cut or sold off there. Management, too.
Yet even as I thought about it, ATVI can do this alone. It does not need to expand into the arenas that BROD has gone into. Consumer products don't have the same "I gotta have it" mentality and buying children's software is really up to the discretion of the parent. The kids can live without it. BROD needs ATVI more than the other way around. So, I've given up on ATVI being taken over. I'm very pleased with the pipeline for this next year.
You guys were talking about a potential MPRS/BROD merger over on the MPRS thread. I can see where MPRS would fit into BROD nicely. BROD needs games and needs them soon. I figure that Riven sales will taper off gradually over the year. Myst will still sell well. JPIII will be a good but not great seller. Then what. Revenues will decline from this earnings season peak. I don't think they have the studios, experience in other genres, or the time to develop their own in house games. Costing several million each, BROD could not start from scratch and hope to get something out. Yet they need a solid stable of good games. Publishing games from other companies may shore them up for a bit. But Microprose has some nice games in their locker. Mechwarrior (of course), MechCommander, M1 tank platoon, Falcon, Civ II, Worms 2, Star Trek.
Microprose has zero net worth. So in essence, it would cost BROD roughly $65 million at the current quote, likely $120-150 million in a takeover. Is it worth it? I already argued that for ATVI, it was NOT worth it. ATVI is doing just fine on it's own. For BROD, doing the deal in stock means issuing 7 million new shares or 33% of the total shares outstanding. In return, they become more diversified and have more stable earnings based on repeat revenue from sequels. But they also get saddled with high production costs and a much more complicated organization. I think the chances are even that BROD will
go after MPRS...but if there is a candidate, it would be MPRS.
As far as MPRS/ERTS:
As someone said, there's too much overlap in simulations for a viable ERTS merger (M1TP, Falcon vs. Janes), given that these games are MPRS' most promising offerings.
So: My prediction: BROD WILL bid for MPRS, despite the negatives. Risky, risky move but I think it will pay off for BROD.
Good luck!
Tom C. |
