Boston, MA 03/04/2013 (wallstreetpr) – Video games are gold mines, but what’s stopping the investors from digging? As gamers gear up, and console wars gather momentum, we’ll find out why the best companies are shying away from investing in video game companies even when it look promising, on the outside.
What goes behind?
The foundation of video game console industry is laid on something called “platforms,” which is similar to modem smart phones and tablet creators. The logic in this is that companies, who sell video games, sell their console hardware at a subsidized rate so as to reach the target market share. Then on, profits are spawned from licensing and sale of games. Placing your bets on the field of gaming can be a tough cookie as pure-plays in this scenario is virtually non-existent.
A peek behind the screens of video game stocks and why it’s inadvisable to invest in these:
Nintendo Co., Ltd (ADR) (PINK:NTDOY) –Nintendo paved way for the upcoming
System wars by releasing latest Wii U, thereby outwitting its competitors and being the first to come up with. What didn’t “click” at Nintendo was neither the device nor market reception, but the poor management of the financial sector of the company. The gross amount amounts to $11 per American ADR. The rest, approx…$800 million of the capital market investment is ascribed to an assortment of Nintendo’s massive video game franchises along with limited partnership of the Seattle Mariners. Regardless of not being in liabilities, Nintendo doesn’t believe in repurchasing shares or paying dividends making it, eventually leading to being branded as a value trap by investors.
Sony Corporation (ADR) (NYSE:SNE) – Sony shall be always remembered as the company who entertained us with their inspiring merchandises like the tiniest transistor radio and the most popular item every ears longed to have: Sony Walkman.
Nevertheless, the company’s venture into the world of video games wasn’t a big success. Sony lost a whooping 415billion yen between the years 2006 to 2008, and had to live with a marginal return of 47billion yen in 2010.
The “One Sony” idea is still to create a breakthrough, and can barely live to another generation of subsidized consoles. Sony’s brooding stillness on its future undertakings, with a possible exception of unveiling with zero new details – ought to give the investors a better idea.
Microsoft Corporation (NASDAQ:MSFT) – Microsoft’s bacon and eggs are the OS and Office Suite, the money bread-winner of the company providing it with profits and returns. The profit made out of Xbox department is negligible compared to the rest of Sony’s advents.Shareholders might possibly achieve more by digging at $68 billion in cash along with the short term reserves kept aside for the depositors as a fraction of the larger dividend/share repurchase plan.
The situation doesn’t look welcoming for stakeholders when Nintendo is adamant and is holding their retained earnings to themselves and Sony keeps them in dark by not providing necessary information regarding its PS4 systems. And lastly, Microsoft Corporation’s Xbox’s profit is trivial compared to the rest of its products. Therefore, there is no guaranteed return that can be harvested from investing in gaming consoles.
The shares of Nintendo Co., Ltd (ADR) (PINK:NTDOY) were up by 1.40% and currently trading at $12.30
The shares of Sony Corporation (ADR) (NYSE:SNE) were up by 0.46% and currently trading at $15.30
The shares of Microsoft Corporation (NASDAQ:MSFT) were down by 0.25% and currently trading at $27.88