INVESTING IN COMPUTER
AND VIDEO GAMES
Copyright 2002 www.ft.com
[ January 7th 2002 ]
friend is soon to retire. He hopes to do the occasional
medical locum, spend much more time painting,
and buy a computer. He uses a computer in his
practice but it is limited to keeping patients'
records and providing prescriptions. He hopes
to attend a class to widen his skills so he can
e-mail friends and family and write letters. Discovering
that around the world he has at least 300 relatives
- he comes from many generations of large families
- a friend presented him with a novel Christmas
present guaranteed to take up much of his free
time. It is a 'family tree' CD-ROM.
are computer programmes available covering almost
any subject and there must be few households who
did not receive at least one CD for Christmas.
We were given a computer Cluedo game, not as time-consuming
as composing a family tree, but fun none the less.
These CDs are available in some supermarkets,
by mail order and in some high street stores.
The leading specialist retailer of computer software
and video games in Europe is Electronics Boutique.
Boutique plc began in 1992. EB Inc of the US bought
25 per cent of the Rhino Group and its retailing
subsidiary Future Zone Stores Ltd and renamed
the business Electronics Boutique. In 1999 its
largest competitor, GAME, with 82 stores, was
added to the group. Now there are more than 300
stores in the UK, Eire and Sweden and 69 in Spain.
There are Electronics Boutique concessions in
Debenhams and House of Fraser stores and they
stock the shelves in Sainsbury's.
assured we all 'shopped till we dropped' before
Christmas and by all accounts the January sales
are a runaway success. In the spring two new gaming
consoles will be available. Microsoft's Xbox and
Nintendo's GameCube have already been launched
in the United States and are selling well. Computer
games are fun for all ages and for most families
have become just another leisure choice.
all companies were 'beleaguered' during 2001 and
not all shareholders were forced to become 'long-suffering'
and 'pessimistic'. This time last year shares
in Electronics Boutique were only 66p. There are
signs of optimism for the business's continued
success in 2002. On the last stock market trading
day of last year, when the FTSE 100 fell yet again,
shares in Electronics Boutique rose 3 per cent
to 137p. Savings rates are now so low and inflation
at its lowest point for more than 40 years, so
a rise of 3 per cent is sufficient to make any
private investor feel a little 'optimistic'. Shares
are now 131.25p.
in the computer games publisher, Eidos, bumped
along at around 60p from 1996 to 1998. Then they
rose and rose to reach their peak at more than
1100p in 1999. The share graph looks like a ski
slope - you reach the top, ski down, and you are
again at the bottom. Eidos, leader in the field,
suffered horribly from the buying frenzy by investors
for new technology stocks.
2000, the end of its financial year, Eidos had
turned losses of 6.8m pounds in 1997 to a healthy
profit of Pounds 49.3m. During the following year
this turned into a loss of Pounds 96.4m and the
share price dropped like a stone. Between March
and September last year Eidos made a loss of Pounds
27.4m compared to a loss of Pounds 82.3m for the
same period in 2000. It is in the fortunate position
of having cash and now has several excellent products
available all over the world.
to occasionally watching Who Wants To Be a Millionaire.
Our daughter recently bought the Millionaire computer
game developed by Eidos. Winning virtual money
makes one much more adventurous in taking risks
to reach the virtual million. After all, if you
are completely wrong you just restart the game.
The show is broadcast in many countries and sales
of the game just grow and grow.
September Eidos has released eight new games.
One of these, Championship Manager, is the best-selling
UK game ever. There are exciting prospects for
2003 with the release of the next Tomb Raider,
Herdy Gerdy and Time Splitters 2. I have to rely
on information from my grandchildren to understand
them. Eidos might even make a pre-tax profit during
its current financial year ending in March. One
broker suggests it may be about 800,000 pounds
but expects it to be in the region of Pounds 10m
in the following year. Over the last year the
shares reached 288p from a low of 150p and are
has survived where other computer companies have
sunk without trace. It managed to raise Pounds
51.6m through a rights issue and last year reduced
its overheads by 24 per cent, by cuts in sales
and administration, not in the research and development
of its future blockbusters.