Sunday, March 13, 2005

Eidos facing the deadline

Thursday BBC ran a story about the latest blight of Eidos. Share price plummets and deadline to satisfy the loan conditions is speeding closer. RBS bank wants to see an acquisition offer on a table by 25th of March. If Eidos passes this deadline without having a legitimate offer, the bank can force Eidos to start selling their property, in order to recover their loan. This is a binge in which I would not like to be.

Eidos claims to have an offer, but it has not been validated yet so it remains to be seen if the white knight rides to the game. The negotiating position of Eidos is horrible, titles have been postponed or failed and cash flow of the company is in almost as bad shape as the budget deficit of the States.

Situation makes and interesting case for game theorists. Is it better to buy Eidos now, before possible sale of assets, which will most definitely happen in auction style and accept the rather hefty debt load in which Eidos is sailing. On the other hand, one can wait until Eidos has to sell property and bid for those properties against tough competitors that could be expensive. Bigger companies should move in now, because that way they can have just the titles they want and sell the rest.

Two scenarios come to mind:

1. New company on the block - that means a company outside the game industry - comes and buys Eidos and secures good distribution and titles. Eidos continues as a publishing and development company. People rejoice, no matter who was the buyer.

2. One of the old competitors puts the money to the table, takes all the titles they want and sell the rest, which are not complementing their product slate. Eidos publishing arm will be disbanded, while some selected development studios might escape the axe. Proceedings form the sales will go to pay off as much of Eidos debt and then the buyer continues business as usual. People complain and nag on discussion forums and black paint the buyer.
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