Dueling Fools
Arts to Arts
The Bull Rebuttal
By
Last week I was discussing my upcoming EA Duel with Foolish colleague Bill Barker, himself an accomplished duelist. Bill was thoughtful enough to warn me that Rick knew the gaming industry and its component companies inside and out and would probably head straight for the jugular, picking apart EA's finances while dissecting my argument.
Wasted worry on my part. Instead, Rick hits me with a paragraph in which he accuses the company of being "profitable" and "growing." Whose side is he on, anyway?
Hard to tell, since Rick appears to be doing just what he accuses EA of: living in the past, playing games nobody but the most hopelessly nostalgic have switched on in 10 years. Dr. J and Larry Bird? Come now.
Rick does talk a bit about valuation, but I'm afraid that argument may come back to haunt him. Think about it: If EA is richly valued now, what's going to happen when the market decides to value the company based on the immense potential of its Internet operations as well as its already "profitable" and "growing" -- ugly words, I know -- console business? The rich, as they say, get richer.
Meanwhile, Rick conveniently overlooks the fact that the "small" and "nimble" companies he gushes over are tenuous bids at best. Of course, it's possible to catch fire every once in a while with a hit, but can it be sustained?
What all those companies really want to do is create reliable cashflow streams, which is why game makers all strive to develop the kind of franchise titles I referred to in my opening argument.
Acclaim <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AKLM)") else Response.Write("(Nasdaq: AKLM)") end if %> has its "Turok: Dinosaur Hunter" series; Midway <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MWY)") else Response.Write("(NYSE: MWY)") end if %> milked "Mortal Kombat" until nobody was left standing; and Munarriz darling Eidos <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EIDSY)") else Response.Write("(Nasdaq: EIDSY)") end if %> has revisited "Tomb Raider" and the gravity-defying curves of Lara Croft with the kind of fanatical devotion generally reserved for fanboys.
EA's stable of home run hitters reads like the Atlanta Braves rotation, with ace after ace after ace. Let me say it again: 16 million-selling titles and counting. And as for specialization, here are two words for you to chew on: Sega Saturn. Plenty of great companies, EA included, made games for that platform and promptly saw it pulled from the shelves after the PlayStation and the N64 blew it out of the water. I don't think I need to remind anyone about eggs and baskets, do I?
Finally, Rick can scoff at the idea of a hunting game if he likes, but I think he might have scoffed his way into a corner this time. To simply laugh away the idea of such a game because he thinks it's silly ignores the fact that outdoor-themed gaming has been a phenomenon in recent years thanks in no small part to Radica Games <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RADA)") else Response.Write("(Nasdaq: RADA)") end if %>, maker of the popular "Bass Fishin" handheld series -- which, incidentally, is also getting into the hunting biz. I'll go with the experts on this one.
If it's happening in gaming, EA is generally either there or getting there. I'm not going to be so bold as to say "GAME OVER," but I think Rick's going to have to insert a few more quarters than he has thus far if he wants to win this one.
Next: The Bear Responds