GameStop (NYSE: GME) didn't have a great third quarter. Total sales increased by slightly higher than 5%. On a GAAP basis, earnings dropped three pennies to $0.28 per share. If you exclude items such as debt extinguishment and foreign currency effects, then adjusted earnings per share on a diluted basis increased 19% to $0.38.

The bottom line may have increased by double digits by GameStop's calculation, but there are a couple reasons not to be too impressed by the performance. First, management missed the analyst's call by three pennies (this particular source is using $0.34 as an adjusted number, and comparing it to the expectation of $0.37). Second, and of higher importance to me, same-store sales decreased 1.8% during the quarter.

Now, it is true that the video-game retailer was cycling off a dramatic 46.3% increase in comps in the year-ago period, an expansion that was driven by Microsoft's (NASDAQ: MSFT) incredible Halo 3 phenomenon. I realize it was a difficult comparison. But there's no way that an investor can't be disappointed by that figure. The difference between positive 46.3% and negative 1.8% is rather sizable; I think management should have tried a little harder to deliver a number on the positive side of things at the very least.

Continue reading Not much fun for GameStop in Q3

Not much fun for GameStop in Q3 originally appeared on BloggingStocks on Thu, 20 Nov 2008 17:00:00 EST. Please see our terms for use of feeds.

The other is that consumers may turn to escapist fantasies and casual diversions to take their minds off their problems. In this sense, video games are no different than the movie industry, which is supposed to be resistant to recessions. Again, companies like Disney (NYSE: DIS) and Time Warner (NYSE: TWX) make content that can immerse you in worlds that are different (and more fun) than the one you currently exist in.

Both arguments make sense. Many video games are like movies these days, so comparing them to the film industry is important. And video games definitely are cheaper than a trip to Walt Disney World. However, there are a few things to keep in mind when thinking about these concepts and making an investment decision. First, we are arguably in an environment that we've never seen before. The variables are so different these days. Who's to say how recession-proof movies are going to be, let alone video games? An Xbox 360 can be had for $200. So what if it's less than a trip to Mickey Mouse's castle? Consumers will still be aching. At the very least, if parents don't cut back in terms of buying Johnny a system for Christmas (and they may not, since parents oftentimes refuse to disappoint their kids during the season of Santa), then surely the households who already have one system installed will think twice about installing a second system (yes, many households have multiple systems).

Continue reading Are video games a defensive industry at this point?

Are video games a defensive industry at this point? originally appeared on BloggingStocks on Fri, 10 Oct 2008 15:39:00 EST. Please see our terms for use of feeds.

Take-Two Interactive (NASDAQ: TTWO), the troubled video game company, is releasing the new version of its popular game Grand Theft Auto IV. The product is expected to set all-time records for the sales of a single video game title.

The Wall Street Journal writes that one analyst "predicts first-week Grand Theft Auto IV sales could be more than $400 million. On Metacritic.com, which compiles game-review scores from dozens of publications, the PlayStation 3 version of the game had a 100 out of 100 score." In other words, it will sell like hotcakes.

Leaving aside the hostile takeover offer by Electronic Arts (NASDAQ: ERTS) to buy Take-Two, the potential sales of the game raise an interesting question.

Consumers pocket books are tight. A larger and larger portion of their income is going to food and gas as the price of those staples rises. Eating out and buying clothes from retailers has clearly dropped off. Many people don't have the money to buy the basics.

In the face of all that, Grand Theft Auto IV is expected to sell extraordinarily well. Microsoft (NASDAQ: MSFT)'s Halo 3 has already set sales records. Game consoles, the PS3, Xbox 360 and Wii are all setting sales records.

Either the consumer has a little more money than most analysts think, or the only thing they have money to do is sit for hours in their darkened homes and play video games.

Douglas A. McIntyre is an editor at 247wallst and the author of Ten Stocks Under $10.

The economy and 'Grand Theft Auto' originally appeared on BloggingStocks on Tue, 29 Apr 2008 10:44:00 EST. Please see our terms for use of feeds.

Microsoft (NSADAQ: MSFT) has cut deals [subscription required] with NBC, CBS (NYSE: CBS), Disney (NYSE: DIS) and a number of other media companies to use their video content on its Xbox Live and MSN services.

According to The Wall Street Journal, "under the agreements, Disney, MGM and Showtime will contribute programming to Xbox Live, an online service with about 10 million subscribers that is primarily used for playing videogames."

Microsoft may be getting a great deal of content, but the question remains whether people would want to watch content through a video game platform, no matter what other features it has. At this point, the American living room is wired with satellite and cable VOD, DVRs, video game platforms and set-top boxes from companies like Amazon (NASDAQ: AMZN). All of this clutter means that no one company is likely to be able to stand out as a core provider of entertainment services.

It is a good thing that the Xbox can be used for playing Halo 3. It is not likely, however, to become a core video viewing device. The consumer won't be able to find it in the pile of other devices.

Douglas A. McIntyre is an editor at 247wallst.com.

Microsoft (MSFT) goes to Hollywood originally appeared on BloggingStocks on Mon, 07 Jan 2008 09:25:00 EST. Please see our terms for use of feeds.

Microsoft (NASDAQ: MSFT) says it sold 4.3 million Xbox 360s in the last quarter of 2007. The popularity of the company's Halo 3 game helped.

According to Reuters, "'Holiday 2007 was a blockbuster season for the gaming industry,' Microsoft said, adding that the Xbox 360 has kept its lead over rivals in terms of total dollars spent on hardware and software." The company did say that its online game download service had problems toward the end of the year and offered a free game to 8 million users.

The news means that Microsoft's device division will probably be profitable for the fourth quarter. It lost money for years. But it also raises the issue of why the world's largest software company is in the business at all. The division brought in $1.9 billion last quarter, but had an operating profit of only $134 million.

The problems that the company has had with its game download service and past issues with the Xbox hardware only give Redmond a bad name. That does not exactly help the image of its core software business.

Douglas A. McIntyre is an editor at 247wallst.com.

Microsoft's Xbox has big quarter originally appeared on BloggingStocks on Fri, 04 Jan 2008 10:05:00 EST. Please see our terms for use of feeds.

A rising tide lifts all ships. Sales of game consoles moved up sharply in November. There had been news from comScore and other research firms that electronic game sales were ahead of all other e-commerce purchases, but no one was certain what was happening in the bricks-and-mortar stores.

Video console sales were so good last month that even the Sony (NYSE: SNE) PS3 did well. Sony did cut prices on the PS3, but why shouldn't it benefit from that? According to MarketWatch, "sales of game software in North America soared 62% to $1.3 billion for the month, according to data released late Thursday from the NPD Group."

The numbers were spectacular. PS3 sales rose to 466,000 from October numbers of 121,000 units. Nintendo's Wii jumped to 981,000 from 519,000 during the same period, despite shortages of the units. Microsoft's (NASDAQ: MSFT) Xbox 360 sales moved up from 366,000 to 777,000, perhaps helped by the recent launch of its "Halo 3" game.

Whatever the reason, video games are the hot property this holiday season. No other category appears to be growing as fast.

Why? Perhaps the major reason is that a video game console can be bought for about $500. The new ones can be used for both games and HD DVD playback. In other words, they are a versatile and relatively inexpensive product.

In a holiday season when the consumer may be feeling a little pinched, what better gift than something almost everyone can play with. And, it is a lot less expensive than a pony or new car.

Douglas A. McIntyre is an editor at 247wallst.com.

Video game sales raise the roof (SNE)(MSFT) originally appeared on BloggingStocks on Fri, 14 Dec 2007 09:33:00 EST. Please see our terms for use of feeds.

There was some hope on the part of Microsoft (NASDAQ: MSFT) and Sony (NYSE: SNE) that their plans to pick up market share in the video game console market might work. Sony cut the price of its PS3 and sales did pick up in late October. Microsoft rested its hopes on its Halo 3 game to drive sales of the Xbox 360.

While each company did do something to benefit sales, Nintendo's Wii could not be pushed out of first place in U.S. game console sales. October sales of all video games went through the roof. According to Reuters "total sales were $1.1 billion, compared with $643 million a year earlier, according to market research firm NPD."

That would mean that all three companies may have done relatively better than they did last year. But the Wii still had a commanding lead, with unit sales of 519,000 in the U.S. Microsoft sold 366,000 Xbox consoles and Sony moved 121,000 PS3s.

The news appears to be relentlessly bad for everyone other than Nintendo. Price cuts and popular games may spike sales, but that appears to be temporary. The price and popularity of the Wii keep pushing it back to the top of the pile.

The news is especially bad for Sony. Its video game business used to be its big earnings engine, back when the PS2 ruled the gaming world. Operating income from the game division is now an anchor that pulls down the balance of the company's financial results.

Maybe Microsoft and Sony should merge their gaming divisions and call their flagship product the XBox3603PS.

Douglas A. McIntyre is an editor at 247wallst.com.

Nintendo's Wii continues to stiff-arm Xbox, PS3 originally appeared on BloggingStocks on Fri, 16 Nov 2007 10:35:00 EST. Please see our terms for use of feeds.

Microsoft had Google-like results originally appeared on BloggingStocks on Thu, 25 Oct 2007 17:13:00 EST. Please see our terms for use of feeds.

Flash: Sony's (SNE) strong quarter hurt by Playstation sales originally appeared on BloggingStocks on Thu, 25 Oct 2007 04:25:00 EST. Please see our terms for use of feeds.

Microsoft (MSFT) Q1 earnings preview originally appeared on BloggingStocks on Wed, 24 Oct 2007 14:01:00 EST. Please see our terms for use of feeds.

Halo 3 may have done better than expected, but it also had a very long tail that pulled up sales of the Microsoft (NASDAQ: MSFT) Xbox 360.

NPD, the research firm, reported that Microsoft sold 528,000 consoles in September. The FT writes that NPD said "3.3m US copies of Halo 3 were sold in the five-week retail period, despite the game only being launched on September 25."

The Nintendo Wii sold 501,000 units, also a monthly record. But the Sony (NYSE: SNE) PS3 sold only 119,000.

While Xbox 360 sales almost doubled from August, and Wii sales were up 24%, the PS3 number was actually a slight drop.

The September headline may be about Halo 3 and Xbox 360 sales, but most of the story has to do with Sony. After years of dominating the video game business with PlayStation 2, its new version is widely considered a failure. It is unclear whether a recent price cut can change the momentum as the holiday season gets into full swing.

It may be that the gaming unit, which drove Sony's earnings for so long, will never do so again and that the big Japanese company will have to rely on TV and consumer electronics sales along with the results from its movie studio.

The PS3 may be doomed.

Douglas A. McIntyre is a partner at 247wallst.com.

'Halo 3' drives spike in Xbox sales; can Sony recover? originally appeared on BloggingStocks on Fri, 19 Oct 2007 06:50:00 EST. Please see our terms for use of feeds.

Continue reading Should you be buying Microsoft (MSFT) shares?

Should you be buying Microsoft (MSFT) shares? originally appeared on BloggingStocks on Wed, 17 Oct 2007 11:21:00 EST. Please see our terms for use of feeds.

In a move that may help video game giant Electronic Arts (NASDAQ: ERTS) compete more effectively with the new Microsoft (NASDAQ: MSFT) "Halo 3," the company has agreed to buy two game publishers.

According to The Wall Street Journal, EA will purchase VG Holdings Corp., the parent company of game makers BioWare Corp. and Pandemic Studios. The game studios create nice ultra-violent games like Destroy All Humans! The companies were owned by Elevation Partners and according to the paper, "the deal is the first time Elevation, which counts U2 singer Bono among its partners, has cashed out of one of its investments."

EA said it will pay as much as $620 million to VG Holdings and $155 million in equity to certain employees.

Electronic Arts could use the help. "Halo 3" sold $300 million in its first week on the market. EA does $700 million in a typical quarter. And games like Destroy All Humans! give the company a product to attract young males buyers of games in which large numbers of humans and aliens are destroyed in a short period.

At $59, EA's stock is near its 52-year top. The new purchase could help push it higher.

Douglas A. McIntyre is a partner at 24/7 Wall St.

Electronic Arts (ERTS) expands its portfolio with VG Holdings originally appeared on BloggingStocks on Fri, 12 Oct 2007 09:52:00 EST. Please see our terms for use of feeds.

Halo 3 developers breaking free from Microsoft (MSFT): Is MSFT culture stifling to game development? originally appeared on BloggingStocks on Fri, 05 Oct 2007 18:01:00 EST. Please see our terms for use of feeds.

Continue reading Microsoft's (MSFT) Halo 3 breaks records, but still won't save gaming division

Microsoft's (MSFT) Halo 3 breaks records, but still won't save gaming division originally appeared on BloggingStocks on Thu, 27 Sep 2007 13:15:00 EST. Please see our terms for use of feeds.

Microsoft (NASDAQ: MSFT) says that its important video game launch for Halo 3 brought in $170 million in the first day that it was available. The Wall Street Journal writes that one analyst believes that the game could help push Xbox 360 sales to 400,000 to 500,000 units in the US this month. In August that number was 277,000.

Does the increased activity help Microsoft much? Not really.

According to the company's 10K, the Microsoft game division lost $1.9 billion last year. Revenue was $6.1 billion. Even if Halo 3 sales bring the segment of the world's largest software company to a break-even, the unit is a small part of the company's $51 billion in sales and nearly $19 billion in operating income.

Microsoft's game operation will continue to be dogged by the popularity of Nintendo Wii and competition from the Sony (NYSE: SNE) PS3. That will keep pressure on the price of the Xbox game console itself. So, the company's sales of Halo 3 and other games will have to be extraordinary to make any financial difference to the company.

For Microsoft, the Halo 3 news is good PR, but it does very little to convince Wall Street that it is worth management's time to fiddle around with such a relatively small and money-losing business.

Douglas A. McIntyre is a partner at 24/7 Wall St.

Microsoft (MSFT): Halo 3 has big first day originally appeared on BloggingStocks on Thu, 27 Sep 2007 05:46:00 EST. Please see our terms for use of feeds.

Shares sold short in Microsoft (NASDAQ: MSFT) fell 14.1 million shares in September to 83 million. It seems that the shorts knew enough to get out ahead of good news.

So far this year, Microsoft's stock has been flat, but over the last three days it has moved up more than 3% on news that it had released its Halo 3 video game and that it is in talks to buy part of social network Facebook.

The enthusiasm about Halo may be well-placed. In the company's last fiscal year, its devices business lost $1.9 billion on $6.1 billion in revenue. The previous year was not any better. The world's largest software company needs a catalyst to drive sales of its Xbox 360, and Halo 3 may well do that.

The Facebook deal has also drawn a great deal of attention. Rival Google (NASDAQ: GOOG) is building a large advertising platform using its own search inventory combined with impressions that it gets from its AdSense network. To expand that business, it is buying DoubleClick and has a deal to sell ads on social network leader MySpace. AOL is making moves in the same business. It owns Advertising.com, the largest ad network, and has just bought behavior targeting company Tacoda.

That leaves Microsoft sitting well behind its rivals. A deal with Facebook could help expand a network around its portal, MSN. Online services lost $732 million last year.

It may be that the company is facing up to its online and devices problems. That could be good news.

Douglas A. McIntyre is a partner at 24/7 Wall St.

Short interest in Microsoft (MSFT) falls ahead of Halo 3 release originally appeared on BloggingStocks on Wed, 26 Sep 2007 09:56:00 EST. Please see our terms for use of feeds.

MAJOR PAPERS:

• Singapore Airlines deal to buy 15.7% of China Eastern Airlines (NYSE: CEA), along with their parent Temasek Holding's 8.3% share, may be in jeopardy as Cathay Pacific Airways is said to also be interested in China Eastern, reported the Wall Street Journal.

• As a part of its annual report to be released this week, BHP Billiton Limited (NYSE: BHP) is expected to announce that it has uncovered potentially the largest gold reserves in the world at its South Australian Olympic Dam mine, reported the Herald Sun.
• According to the Washington Post, citing congressional investigators, the FBI is investigating technology company Unisys Corporation (NYSE: UIS) after it allegedly failed to detect "cyber break-ins traced to a Chinese-language Web site and then tried to cover up its deficiencies."
• The Telegraph reported that British bank Barclays (NYSE: BCS) is reportedly preparing to sell FirstPlus, one of its subprime consumer loan units, at a loss. Barclays is expected to obtain a price lower than GBP4.5B, the book value of the unit's loan portfolio.
• Microsoft Corporation (NASDAQ: MSFT) will tomorrow release its 'Halo 3' video game and the company expects over $150M in sales in the first 24 hours of its release, and a profit margin that could reach 90%, reported the Los Angeles Times.
• Housing slump or not, Home Depot Inc (NYSE: HD) CEO Frank Blake says there will be no large jobs cuts or store closings, reported the Associated Press.

Newspaper wrap-up: FBI investigating Unisys originally appeared on BloggingStocks on Mon, 24 Sep 2007 09:20:00 EST. Please see our terms for use of feeds.

Continue reading Microsoft's (MSFT) Halo 3 launch to put final nail in Sony's (SNE) gaming coffin?

Microsoft's (MSFT) Halo 3 launch to put final nail in Sony's (SNE) gaming coffin? originally appeared on BloggingStocks on Fri, 21 Sep 2007 10:00:00 EST. Please see our terms for use of feeds.

Once Microsoft Inc.'s (NASDAQ: MSFT) Halo 3 game is launched in September 25th, much of the nation will see some retail madness as old and new gamers line up (and sleep) in those long lines just to get a crack at buying the newest, best game for the Xbox 360 gaming console. Naturally, Best Buy Co. (NYSE: BBY) locations will roll out the game with a considerable fanfare.

Will the nation's largest consumer electronics retailer take advantage of the hoopla? I hope so.

In fact, some locations will be holding midnight parties the night of September 24th, similar to recent kickoff for the Sony PlayStation 3 and 2005's launch of Halo 2. Best Buy generally provides some kind of 'surprise' and freebie to go along with events like this.

In terms of marketing strategy, certain gaming titles (and consoles) and the Apple, Inc. (NASDAQ: AAPL) iPhone are about the only consumer electronics items that generate this kind of fervor. In this instance, Best Buy should milk it for all its worth by providing "20% off new titles" coupons to those that attend the launch party and buy the new Halo 3 game when it is released in a few weeks. The company can afford this kind of promotion to keep the fishing hook in the mouth of as many gaming title purchasers as possible.

Best Buy (BBY) locations to be packed for Microsoft's (MSFT) Halo 3 launch originally appeared on BloggingStocks on Wed, 12 Sep 2007 14:39:00 EST. Please see our terms for use of feeds.