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Technology Stocks : eidos--maker of Tomb Raider -- Ignore unavailable to you. Want to Upgrade?

To: Andrew C.R. Biddle who wrote (1091)	7/6/1998 6:15:00 PM
From: Bleeker	Respond to of 1773

Thanks Andrew. Link to psygnosis.com Bleeker

To: Andrew C.R. Biddle who wrote (1091)	7/7/1998 3:10:00 PM
From: Bleeker	Respond to of 1773

--Goldman Sachs has an EPS estimate of -57 cents for Q1. While I would take this with a grain of salt, it seems expectations for Q1 are very low. Last year Goldman had expectations of positive EPS and were burned when EIDOS reported -44 cents so perhaps they're hedging their forecast this year. The only scenario in which I see EIDOS reporting -57 cents EPS is if it incurred massive R&D expenses and if it plans to report another charge. I wanted to share the GS estimate because I got it from Goldman recently and it explains in part why the stock has dropped. Another reason that contributed to the slide were the acquisition rumors probably. I think the market's response to an acquisition would depend on how EIDOS plans to finance it and how much it's willing to pay. I would prefer if EIDOS established more credibility with earnings before it embarks on the acquisition hunt. If THQ could report 13 consistent quarters of positive earnings, EIDSY should be able to do the same at least for a year; if it does its purchasing power and P/E multiple would expand accordingly. That is why I think the best strategic time for an acquisition would be before the holiday season actually begins. --I hope EIDOS refrains from acquiring Psygnosis. I cannot see how it would finance such a buyout. It would need to raise $100 million nearly and given the current stock price, I think it would be more prudent to focus on consistent positive earnings for several more quarters. The other alternative is a bond offering but EIDOS has $50 million in debt already and such a move would mar its otherwise very healthy balance sheet. On the other hand, EIDOS would need to use less than half its cash position to acquire Rage Software. --I was told by EIDOS PR that most of the FFVII sales will be counted in Q2 rather than Q1. So perhaps there is a possibility that the GS Q1 estimate is not overly negative. I should note that GS expects a 60% increase in sales in fiscal 1999 compared to 1998. But most of the sales will come in the Christmas season. Bleeker