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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: HB who wrote (27948)	5/5/1998 5:22:00 PM
From: Knighty Tin	Read Replies (2) \| Respond to of 132070

HB, to put the valuation of Midway in perspective, industry leader Electronic Arts is selling for 41 times eps. These cos. usually sell at premiums to the market, if they have profits and growth potential. Interestingly enough, Midway was actually the market share leader in home pc games for a while last year. ERTS came out with a load of titles and reclaimed the lead, but MWY seems to be the only tough competition. Just as a note, I have owned and been short ERTS many times in the past, and had a nice put play on Acclaim until it went to heck in a handbasket. I have also owned others in the group, such as Spectrum Holobyte, which now goes by a different name and some of the casino stocks I own are competitors in the game market. The last time I bought ERTS it was at $22 and change and I noted it here. I originally entered Midway through my positions in WMS convertible bonds. The Midway story is a unique one. Once a division of slot machine/casino hotel/pinball co. WMS, it is now in the process of becoming fully independent. This is the largest co. supplying machines and games to the video arcade market, the noisy quarter eaters in every mall in the world. Midway also produces the same and different games for stand-alone and pc game rigs. The big advantage I see for MWY is that the arcade business tells them immediately when they have a big hit on their hands and whether or not to push the games hard for the home market. Independence is vital for them. Nothing against the guys, but WMS was not famous for its dynamic management style. Nice folks always willing to answer any question, but not a Business Hall of Fame Candidate in the mix. I think it was possible that they have been holding Midway back. Certainly, the overhang of WMS shareholders willing to sell MWY stock have hurt the stock price. There are no guarantees here, but I just don't feel that Erts has earned a pe ratio more than double Midway's, especially when MWY had the higher number just a few months back. I own a bit of Midway straight, but I think my long MWY/short ERTS play is a sure winner. MB

To: HB who wrote (27948)	5/5/1998 11:19:00 PM
From: don ryndak	Read Replies (1) \| Respond to of 132070

HB To try to answer your questions, I got re-interested when Michael Burke mentioned it in one of his responses regarding stocks that he liked long. It had historical significance to me, in that I remember it before it got bought up by Williams Company or maybe even Bally had it at one time, and when it was truly a CASH COW, for the boys. As for gross margins, I take a decline from mid 60% to mid 50% as a cost of doing business in a competitive market. The P/E ratio is the lowest among the game industry people that are making money. Typically the range in the game industry has been anywhere from 25 to 50. Electronic Arts for instance is around 37. So if you just went with a 25 p/e it should be at 36-37. As for the DD its seems to be as you stated, I did not find anything discouraging or encouraging but the declining price. The basic story as I know it is, spin off from WMS, good arcade games, good ability to move arcade games into the homes on Sony and Nintendo platforms. Plus with the buy back from GT, it gives them access to the pc market. It has also been stated in other articles that I have read that the management team is very good. Anyway, I am in today at 17 with the idea that Xmas is just around the summer, and it seems like the pick of the litter. Who knows... Any feedback that you get would be appreciated. don ryndak