The Financial Timesreported last week that representatives for The Beatles, Activision Inc. (NASDAQ: ATVI), and MTV Games, a division of Viacom Inc. (NYSE: VIA), are in talks about developing Beatles-themed video game versions of Guitar Hero and Rock Band "in a move that could pave the way for a broader licensing of the Fab Four's catalog." Although the final deal would eventually be worth several million dollars, it would have to win over both Apple Corps and the EMI Group, the two companies that oversee the band's business interests and the master recordings.
The Beatles have been one of the major artists to resist any move into the digital world, but if such a deal were to occur it would likely happen simultaneously with any move by The Beatles into digital stores and the digital market. In the past year and a half, numerous rumors have appeared that cited 2008 as the year that would see the move, including comments made by Olivia Harrison, George Harrison's widow. Unfortunately, no such appearance by the band into stores like Apple Inc.'s (NASDAQ: AAPL) iTunes or Amazon.com Inc.'s (NASDAQ: AMZN) MP3 Store has happened even with a new management team led by former Sony BMG executive Jeff Jones.
Any deal would send a massive shockwave through the music industry and no doubt come with numerous marketing and advertising techniques that have become popular and successful in recent years. Although many Beatles purists and fans might be put off by an iTunes-themed commercial featuring The Beatles and the band's music, the exposure provided by such a method would increase awareness of the band to younger and newer audiences.
Spurred by a near epidemic occurrence of brain-degenerating conditions as we age, people of all ages and backgrounds are stepping up their personal efforts to improve and maintain their brain health. According to a story in USA Today, sales of brain fitness software reached nearly $230 million in 2007. USA Today stated, "SharpBrains, (a market research firm) estimates the brain fitness software market will reach $2 billion in 2015 in the United States."
Prudent investment strategy might include a speculative foray into this popular and growing field. In light of this, you may wish to pay heed to blogger Steven Mallas, and read his take on Activision (NASDAQ: ATVI).
First on the list for brain maintenance is physical activity, which probably accounts for the outstanding sales of Nintendo's Wii Fit. from Nintendo Ltd. (OTC: NTDOY). Active lives promote healthy blood circulation, which helps to feed steady amounts of oxygen to the hungry brain. Good hard work, cardiovascular exercise and even regular sexual activity can all help to keep your heart pumping adequate levels of oxygen into your brain.
At least one of my stocks is doing pretty well in this terrible, depressing market environment. Activision (NASDAQ: ATVI) hit a new 52-week high of $36.84 on Tuesday. It closed a little below that, but it was a great, high-volume day for the stock, one that saw the shares rise almost 5%.
Yes, with the Dow Jones index shedding 100 points, with every other stock in my portfolio in the red, including MFA (NYSE: MFA), which closed down to $6.66 -- the number of the beast, my friends -- Activision not only held its own, but it powered higher. Perhaps it's due to the new Guitar Hero game coming out for the DS. Perhaps there's a new wave of excitement over the merger now that investors are receiving their documents (I just got mine the other day, a big book full of wonderful information about the Activision/Vivendi agreement). No matter, though, it was Activision's day, since competitors Electronic Arts (NASDAQ: ERTS) and Take-Two Interactive (NASDAQ: TTWO) were down Tuesday, and THQ (NASDAQ: THQI) closed up only four measly pennies.
I love this price action, and I think it might be predicting a prosperous Q4 holiday season for the company, which will eventually be called Activision Blizzard after the merger. I'm also hoping the action indicates that the stock will be reasonably stable during the summer, which I think is going to be rough on the markets as oil and inflation headlines dominate the tape.
Take-Two Interactive's (NASDAQ: TTWO) Grand Theft Auto IV game stole the number-one position on the software sales chart for May, according to data from market research firm NPD. It sold over 1.3 million copies last month, and it has moved over 4 million since it hit the street. I figured Take-Two would be taking the top slot here, but the big question on my mind pertained to how Nintendo's (OTC: NTDOY) Wii system would do in May. After all, the fad has to wear out at some point, right? At some magical juncture, either Sony's (NYSE: SNE) PlayStation 3 or Microsoft's (NASDAQ: MSFT) Xbox 360 will displace the Wii and become the top-selling system of the month.
Well, that hasn't happened yet. The Wii sold the most, moving 675,000 systems. That was more than three times the amount of consoles sold by PlayStation 3. And as for the Xbox 360, that came in dead last, moving only 187,000 units. All told, total video-game sales, including hardware and games, increased 37% year-over-year. Yep, video games are still hot.
I'm going to predict that the Wii Fit will be the top-selling game package for the month of June. This thing is flying off the shelves in my area, even at $90 (apparently, high fuel costs aren't hurting Nintendo's clientele). Does that mean that Nintendo might make for a good short-term trade? Maybe, but I'd prefer buying it safely below $60 per share. As of this writing, it's trading well above $60 per share. I continue to hold Activision (NASDAQ: ATVI) as my play on video games, and will be keeping Electronic Arts (NASDAQ: ERTS) in the back of my mind as August approaches, since that will be when the new Madden game arrives in stores. Not sure if that's worthy of a trade yet.
Disclosure: I own Activision; positions can change at any time.
The next installment of Activision, Inc.'s (NASDAQ: ATVI) Guitar Hero franchise, Guitar Hero: Aerosmith, is coming out this month, but that has not stopped rumors about future installments, namely one based on the music and career of Metallica. No official announcement from Activision has been made, but Billboard cites a recent SEC filing and a Gamespot post that fuels the rumor. According to Gamespot, the new game is the second rumored title relating to Metallica, a vehicle-based shooting game was announced and canceled a few years ago.
Guitar Hero 4, now known as Guitar Hero: On Tour, is expected for release later this year, but if speculation is correct then a Metallica-based game could see release next summer similar to the release schedule for the Aerosmith version. On Tour will feature a full compliment of instruments like the Rock Band game. Guitar Hero: Aerosmith follows the career of the band from their beginnings in Boston and uses the band's music prominently, "along with a smattering of songs from bands that Aerosmith wanted included." Aerosmith appears in the game as motion-captured animated versions of themselves.
Like Aerosmith, a Metallica-based game would provide a lengthy career storyline to follow, as well as numerous songs that have remained a staple of the band's live acts over the years. It would also present an interesting case to examine success with Metallica since the band seems doomed forever due to band member's stances on illegal music trading and Napster in the late 1990s. Not that the band does not have a large and loyal fan base, but the lasting stigma from that debacle has not abated in the last few years.
Activision Inc. (NASDAQ: ATVI) doesn't want to let Rock Band have all the fun. According to Reuters, Activision wants to turn its Guitar Hero platform into a truly direct competitor to its colleague. Come the fall, the publisher will release Guitar Hero World Tour, a package that will include a guitar, a microphone, and a drum set. There will be online capability; players will also be able to create their own tunes via a suite of digital-music tools. And all the major platforms from Sony Corporation (ADR) (NYSE: SNE), Microsoft Corporation (NASDAQ: MSFT), and Nintendo Co., Ltd. (OTC: NTDOY) will be getting this game.
Rock Band, which is developed by Viacom, Inc. (NYSE: VIA)'s Harmonix and sold by Electronic Arts (NASDAQ: ERTS), is no longer unique now that Activision has expanded the depth of its famous brand. Indeed, Guitar Hero still thrived even in the face of Viacom's music game, but it looks like Activision is taking no chances; the publisher obviously realizes that, as time goes on and upgrades to Rock Band come along, the Guitar Hero franchise might see eventual erosion of its fan base as the fad matures. Evolution would certainly be justified at this point.
Yet, I am of two minds about this move. On the one side, I can understand why this had to be done. And I can see why it should work out; after all, Activision's brand equity when it comes to this Guitar Hero game is incredible. Seriously, if you don't know, a lot of players out there, both hardcore and casual, love this platform. However, there's another side to me that wonders if traditionalists won't necessarily enjoy the aspect of the additional instruments. Do they add value, or do they now make the brand seem clunky and complicated? On a gut level, I always theorized that those who chose Guitar Hero over Rock Band relished the fact that it was just one guitar. Then again, going back to the brand-equity thing, maybe current players will now want to try out a more complex musical-gaming experience since the Guitar Hero name is attached.
Activision (NASDAQ: ATVI) is a leading developer, publisher and distributor of interactive entertainment and leisure products. Offerings include such action titles as Tony Hawk's Underground, Doom, and Call of Duty. The firm also makes games based on licensed properties associated with the films Star Wars, Spider-Man, X-Men and Shrek. Activision games operate on Sony (NYSE: SNE), Nintendo and Microsoft (NASDAQ: MSFT) console and portable devices, as well as on personal computers. The company agreed to sell a 52% stake to Vivendi late last year, in a deal valued at $9.8 billion. Activision will be combined with Vivendi Games, to create the world's largest independent video games company.
The firm surprised the Street earlier in the month, when it reported fiscal Q4 EPS of 17 cents and revenues of $602.5 million. Analysts had been expecting five cents and $369.1 million. Management also guided FY09 EPS to $1.30 ($1.18 consensus) and FY09 revenues to $3.1 billion ($2.82B consensus). Moving toward the Vivendi link-up, the CEO promised to "focus our resources on proven properties with broad global appeal." Six brokerages subsequently declared the stock a "buy".
Another month has gone by, and in the world of video games, the story remains the same. I have been very impressed with the resilience of the Nintendo (OTC: NTDOY) franchise. This Wii "fad" just continues on and on. According to data from marketing-research firm The NPD Group, last month, the Wii system sold over 714,000 units, and the Nintendo DS moved over 414,000 units. Game systems by Sony (NYSE: SNE) and Microsoft (NASDAQ: MSFT) were left far, far in the dust. The Associated Press said all other major systems couldn't even reach 200,000 in terms of unit sales.
And now, this week will bring a potentially big catalyst for the Wii. The Wii Fit device, which is an electronic exercise program designed to take full advantage of every innovative nuance offered by the console, is expected to be a huge hit. I can almost guarantee that it will be, as I personally have heard a lot of buzz over it and, on an anecdotal level, I know a lot of people intend to pick it up when it is released. I don't think it's going to fail, even at the relatively high price point of around $90.
I'm not, however, going to buy any Nintendo stock based on the coming excitement this week, even though I think the shares have a great chance of popping. I've owned Nintendo in the past and made money on it, and I'm always thinking about when to re-enter, but for now, I am staying on the sidelines. For me, it feels like too much of a risk in terms of investors selling on the news once the Wii Fit is out. I could be wrong, of course; in fact, Nintendo's ADR's closed up a buck to settle at $72.50 per share on Friday. That puts it not too far away from the 52-week high. But, as much as I love the video-game sector -- I own shares of Activision (NASDAQ: ATVI), in fact -- and as much I recognize Nintendo's dominance over the PlayStation 3 and the Xbox 360, I'm going to sit this one out.
Disclosure: I owns shares of Activision; positions can change at any time.
Electronic Arts (NASDAQ: ERTS) issued Q4 and full-year numbers on Tuesday. The competitor of Activision (NASDAQ: ATVI), THQ (NASDAQ: THQI) and Take-Two Interactive (NASDAQ: TTWO) reported adjusted fourth-quarter revenues of $919 million, which was good for a 50% increase. Earnings per diluted share were $0.09 on an adjusted basis, also representing a 50% jump. For the full year, adjusted revenues jumped 30% to $4 billion and earnings per diluted share rose 36% to $1.06. Not too bad.
EA, according to Briefing.com, also beat Wall Street's expectations by quite a bit. EA was forecast to only break-even on a non-GAAP basis, so the difference was a nice $0.09. In terms of operational cash flow, EA increased the metric by 33% during the fourth quarter, but for the full year, operational cash flow decreased 15%. Ah, such is life, I guess. Nevertheless, EA produced 27 titles that sold over a million units this year -- three more than in the previous year. Fifteen of its titles sold over 2 million units -- five more than the last fiscal period. Titles such as Army of Two and Rock Band, as well as various sports franchises, drove the results.
Things sound pretty good, don't they? EA is definitely a major force on the Sony (NYSE: SNE) PlayStation, Microsoft (NASDAQ: MSFT) Xbox 360 and Nintendo (OTC: NTDOY) Wii platforms. But EA has had some challenges during this console cycle, and there is the perception that it needs a major merger to combat the threat posed by the Activision and Vivendi Games transaction. And let's not forget that Activision is on fire all on its own. That's what the whole attempted takeover of Take-Two is all about.
Activision (NASDAQ: ATVI) late Thursday reported a fourth-quarter profit that handily beat expectations as video games sales nearly doubled with strong demand for Guitar Hero 3 and Call of Duty 4 games. ATVI shares are up over 4.5% in premarket trading.
Bristol-Myers Squibb (NYSE: BMY) and Sanofi-Aventis (NYSE: SNY) are about to face a generic threat from Swiss drug firm, Schweizerhall Holding, that said it's going to soon launch a generic version in Germany of Plavix blood-thinning drug.
Clear Channel (NYSE: CCU) reported its profit soared to $799.7 million or $1.61 per share in the first quarter while revenues rose 4% to $1.56 billion. The results beat expectation even when taken excluding one-time items that have earnings rising 70% to $161.4 million or 32 cents a share.
No matter how you slice it, whether you look at GAAP or non-GAAP statistics, Activision, Inc. (NASDAQ: ATVI) kicked it during the quarter. And I mean really kicked it.
Net sales for Q4 set off at warp factor 11, rising 93% to $602.5 million. Earnings per diluted share on a reported basis came in at $0.14, reversing a year-ago loss of $0.05 per share. For the full fiscal year, Activision grew revenues by 92% -- again, sales growth in the 90's! -- to $2.9 billion. Earnings per diluted share were $1.10 in 2008 versus a measly $0.28 in 2007. Take that, Electronic Arts Inc. (NASDAQ: ERTS) and THQ Inc. (NASDAQ: THQI)! Activision is truly taking advantage of consoles from Microsoft Corporation (NASDAQ: MSFT), Sony Corporation (NYSE: SNE), and Nintendo Co. Ltd. (OTC: NTDOY). Titles such as Call of Duty 4, Guitar Hero, and Transformers drove the results -- like I always say, it's always about the quality of the slate. On an adjusted basis, earnings beat expectations by a whopping $0.12, according to Briefing.com.
I bet EA is really wishing its deal went through for Take-Two Interactive Software, Inc. (NASDAQ: TTWO) right about now! I believe Activision will continue to do well the rest of the year, and I love its fundamentals, but what about the stock? As of this writing, it's up about 3%. If you are looking to trade Activision, I'd probably wait until all the earnings excitement is over and be patient for pullbacks as the market may perceive that everything is priced in at the moment now that the news is out.
Disclosure: I own shares in Activision; positions can change at any time.
I really want to turn bullish on Midway Games Inc. (NYSE: MWY), but there's no way I can do that right now. The company's stock is below $3 a share, and it's there for a reason. But, let's first look at a couple positives from the software publisher's latest earnings release. Net revenues shot up 170% to $29.9 million in Q1; that beat expectations, according to Briefing.com. And the net loss per share also beat expectations by a penny -- it came in at $0.29 per diluted share on an adjusted analysis.
But, that net loss is worse than the previous year's net loss of $0.20 per diluted share, also adjusted. Like I say, someday I want to report that Midway has turned the corner and is a buy. I simply can't do that, even though I recently bought the publisher's catalog title Rampage: Total Destruction for the Nintendo Gamecube and am having a great time with it -- guess it goes to show that you can't always judge a company's stock by the fact that you enjoy its products. One thing that Midway needs to do is perhaps seek some synergy from Viacom, Inc. (NYSE: VIA)'s MTV and Nickelodeon channels. Sumner Redstone is, after all, the controlling shareholder of Midway. Granted, THQ Inc. (NASDAQ: THQI) deals with the Nickelodeon characters at the moment, but in the future, Redstone needs to figure out a way to use his media assets to promote Midway and perhaps funnel some licensing deals to the publisher. MTV is certainly doing well with its own video-game ambitions via Rock Band, which is sold by Electronic Arts Inc. (NASDAQ: ERTS).
One thing I must point out is that, since my last article about Midway, the stock is up. This was mentioned to me by a reader. So, in objective trading terms, if you went against my opinion, you would have made money, no question. However, I have to stick to my guns and say that I personally wouldn't play the volatility in Midway's shares. Yes, you could luck out with it, maybe Redstone will come along one day and buy out the remaining shares at a big premium (doubtful, at least the big-premium part). I wouldn't want to speculate on such an outcome; I am still content with my Activision, Inc. (NASDAQ: ATVI) shares as a way to play video-game investing.
Disclosure: I own shares in Activision; positions can change at any time.
The theory makes sense. As the economy softens, Sony (NYSE: SNE), Microsoft (NASDAQ: MSFT), and Nintendo will cut the prices of their game consoles to keep sales volumes up. The CEO of game publisher Activision (NASDAQ: ATVI) has stated as much.
According toReuters, "With the rising costs of fuel and food and housing, it is more difficult to go out and buy a $399 console, and I think it's going to put pressure on the console manufacturers to reduce their prices," Bobby Kotick said.
The problem presents a delicate balance for the console makers. Nintendo's stock has soared because of the popularity of the Wii. Microsoft just began to make money in its device division in the first quarter of the year. After a number of quarters of losses, it looks like the PS3 may start to contribute to the Sony P&L.
Holding prices may keep margins high, but drop unit sales.
There are two factors that work in favor of the console producers. The first is that, as their manufacturing volume has gone up, component prices have come down. That means if retail prices are lowered, the companies can still make money.
The other factor is that all three companies get licensing fees from each video game that is sold to run on its platform. With new offerings like Grand Theft Auto IV on the market, those fees should soften the blow of lowering hardware prices.
Watch for the price of game consoles to be dropped -- and soon.
The Financial Times reported last week that representatives for The Beatles, Activision Inc. (NASDAQ: ATVI), and MTV Games, a division of Viacom Inc. (NYSE: VIA), are in talks about developing Beatles-themed video game versions of Guitar Hero and Rock Band "in a move that could pave the way for a broader licensing of the Fab Four's catalog." Although the final deal would eventually be worth several million dollars, it would have to win over both Apple Corps and the EMI Group, the two companies that oversee the band's business interests and the master recordings.
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