Tuesday, May 10, 2005

Game industry stocks fumbling

Electronic Arts, Activision, and THQ have shaken investors expectations for the future. This shows in the stock price of above-mentioned companies. It is especially the short-term expectations, which are rather depressing.

If the giants of the field are shaking, smaller competitors catch the cold in no time. No matter what is the situation of an individual game company, the valuation of these companies is going to fall. Luckily, many companies in the game industry are not public and therefore outside of these short term price fluctuations.

There are three companies that come in mind especially: Infogrames, Vivendi and Eidos. Because of their financial situation, these game companies will have trouble every time when somebody in the game industry sneezes. For example, as SCi’s price has been dwindling, the rumours for new offers on Eidos start to circulate.

Game companies that are working in the area of mobile games are whole different matter. Market size is growing at staggering speed. Development costs, although rising, are quite low. Game development cycle is short so companies are better able to manage revenue flow. Furthermore, just one mobile hit can bring lot of cash for the company.

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