EA, GameStop lead game-stock decline

Number one publisher and game retailer each shave a buck off their stock price as game companies see overall day of mild to solid losses.


This week saw one of the most respected bastions of mainstream journalism make some gloomy predictions about the future of the game industry. In a lengthy article today, The New York Times highlighted how many publishers have gone from being Wall Street's darlings to its whipping boys.

In particular, the article focused on how the industry is currently at a mini-nadir of the boom-and-bust cycle typically generated by the transition from current- to next-generation consoles. It quoted Soleil-Hudson Square Research's Daniel Ernst as saying that his fellow analysts have dropped their original estimates of 2006 game revenue by as much as 60 percent.

Ernst also said that now even the most optimistic analysts peg the next-gen-platform installed base as reaching only 15 million by year's end. Of those, he estimates that 12 million will be Xbox 360s--and the rest a hodgepodge of Nintendo's affordable Wii and Sony's superpowered PlayStation 3.

Investors responded to the Times by--what else--selling off game stocks. Two publishers that figured prominently in the piece, Activision and Electronic Arts, both saw their share prices take it on the chin. Santa Monica, California-based Activision fared better than its archrival, shedding just $0.44 (3.80 percent), closing at a 52-week low of $11.14 on extremely high volume--over 13 million shares. EA didn't hit rock bottom for the year, but did lose more value during the day, falling $1.09 (2.58 percent) to end the day at $41.21 in moderate trading.

The other big game-related loser for the day wasn't a publisher, but rather the nation's number one game-specialty retailer. GameStop's share price sloughed off $1.51 (3.83 percent), ending the day at $37.92. That was just pennies above its 52-week low of $37.85--but not that much below its 52-week high of $39.46.

As for the rest of the major publishers, Atari lost $0.02 (3.64 percent) to close at $0.53, further tempting the Nasdaq to delist it. Majesco slipped $0.12 (7.84 percent) to $1.41. While its CEO talked to analysts, THQ saw $ 0.09 (0.42 percent; close: $21.40) trimmed off its share price, while Take-Two Interactive saw a marginally more modest dip of $0.07 (0.53 percent; close: $13.03).

"The trend suggests total capitulation from investors," Wedbush Morgan analyst Michael Pachter told GameSpot. "Now, it's no longer a transition issue, they seem to truly believe that these companies will not be as profitable as in the past. I think the sell-off is overdone, and we'll see a rally by the fall when it becomes clear that the other two consoles will actually launch."

Only one major third-party publisher saw gains during the day. Midway Games saw a modest $0.33 (5.19 percent) rise, climbing to $6.69.

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