Computer game stocks and one in paticular

[Uncle]

SCI Entertainment

Is this ready to take off again..........Indicators showing some positive signs

 

[Max Damage]

Please uncle. I hope so

 

[Uncle]

Max ....If you are still holding , then I hope so too. The lesson I think from this is NEVER feel sentemental towards a share no matter how good the fundamentals. If the market dictates, then cut losses...........CUT LOSSES.

Best wishes

John

 

[Max Damage]

Still holding. The fundementals are strong. Did sell some out at 245p and 145p and then put the money back in at 123p

 

[Uncle]

Up 13 today to 127.5........hope they keep going for you Max

 

[bunkum]

Hi all,

Well today is the one month anniversary of the bombshell that SCi were not releasing year end results, instead they issued a profit warning. Investors (like myself) saw their paper value disintergrate and traders made huge losses. Abandon ship was the call, and my how they abandoned shipped, carnage then ensued. In 30 days SCi has gone from £3.20 a share to £1.04 a share. That equates to a +£60m company to a £20m company in 30 days. SCi have been hit with a big stick.

During this time much scaremongering has been said by former investors and traders. This to a degree is understandable as the pain of being let down hurt so many, but then after a while a pattern forms and you realise a lot is said to fit in with there own investment needs. One thing most investors are agreed with is one day in the not to distant future SCi will come good.

So where do we stand now, after 30 days 100's of investors have now crystalised their profit/loss and have a clean sheet of paper. Many may never trust SCi and its management again, but many know the future is exciting and will be very profitable. These will be looking for a new entry point which can start any time after Monday.

Some are saying it will take months for SCi to start to recover but I disagree as with many profit warnings after 30 days things start to recover. They do not recover in a straight line but they do recover take a look at SEM or PLM as examples. Two stocks that were also hit with a big stick but are both now recovering.

Some are saying that institutions will bail out but I disagree. There has not been during the last 30 days any large sells or any notices to back this up.

Some are saying SCi have a cash burn problem but I disagree. SCi have backed this up with a comment on their site saying:

Q. - Do you have any plans for fund raising?

A. - We currently have no plans for fund raising.

http://www.sci.co.uk/Company/bb/00_12_23.htm

So what actually happened? Well an insight to this can be found on http://www.gamesinvestor.co.uk/Companies/SCi/SCi_News_2001/sci_news_2001.html

18/01/01&26/01/01 SCi makes profits warning, announces prelims
Less than a month after it had issued a positive trading statement (see 2000 news), SCi has been forced to announce a profits warning. This bizarre situation has arisen in spite of a good trading period around Christmas with SCi's Thunderbirds Game Boy product selling ahead of expectations and the revelation that the Company has signed a $4.3m deal with US publisher SVG/Crave.
One cause of the profits warning was the recognition, a week before the results were due, that one of its larger European publisher partners was not in a position to fulfill
a sales guarantee agreed for a range of SCi's products a few years ago. The Company has therefore written £600,000 from its debtor column.
In the (currently popular) tradition of getting bad news out of the way at one point not progressively over time, SCi has also chosen to write down its investment in internet music company music3w.com (formerly Ontourworld) resulting in a further £700,000 being passed through the P& this year.
However, the Company has not stopped there and has also made a further two adjustments which have negatively affected the Company's FY00 performance. The first arose from a request by the Company's auditors to postpone until FY01 and FY02 the recognition of £1.2m in revenues relating to the contracted exploitation of Actualize IPR (game engines, porting rights) by a third party publisher The second, of £1.8m, relates to a retrospective modification to the valuation of Actualize which would have otherwise resulted in marginally improved bottom line for FY00.
Ultimately the exercise serves to benefit future financial periods and the Company is confident of a return to profitability in its next financial year.

So what has changed in the last 30 days?

Well one thing that has changed is the deal with Crave. As this was announced on the release of the results it may have been overlooked by many but it is a big step forward for SCi.

http://www.sci.co.uk/Press/26-1-01_distribution.htm

Strategic Distribution Partnership for North America 26/01/2001

Forecast revenue of $4,300,000

SCi Entertainment Group Plc ("SCi"), one of Europe's fastest growing publishers of entertainment software and new media content today announces a strategic North American distribution relationship with SVG, the distribution arm of Crave Entertainment Inc.

SCi has entered into a long-term strategic distribution partnership with Crave Entertainment Inc. Under the agreement Crave's distribution company, SVG, will exclusively distribute a selection of SCi's forthcoming products in North America over the next three years. The products will be published by SCi who will control PR and marketing. SCI will establish a marketing and PR team in the United States, working closely with SVG. SVG has made minimum unit guarantees for each of SCi's products with total forecast revenue of $4.3m

Commenting on the agreement Jane Cavanagh, CEO of SCi said,

"This is a very significant development for SCi. By establishing a North American publishing operation, we will significantly improve margins and increase control over launch dates and marketing. By working exclusively with SVG we will minimize overheads and benefit from the strength of SVG's extensive distribution channels."

Another marketing change is the use of RDA Communications which will help SCi on a global basis. For more information go to http://www.rdacomms.co.uk they have a strong client bases so should do well for SCi.

Another thing that happened in the last 30 days was SCi won an award for Thunderbirds GBC.

http://www.eb.uk.com/ebguideto.asp?tab=other&guide_id=69

BEST GAME BOY GAME OF 2000: Thunderbirds

A variety of game styles bring the classic sci-fi series to life with considerable class. Graphics, sound, gameplay – Thunderbirds has it all.

Also during the last 30 days SCi's current crop of games have been selling well. Thunderbirds is @ no. 6 in the GBC charts and TDR2000 is starting to sell well in the USA.

Also during the last 30 days Thunderbirds GBC has been translated to French, German, Italian and Spanish for the European rollout. This falls in line with Thunderbirds now being shown on many TV stations across Europe. Pukka Games are currently finnishing the Japanese version. Carlton have continued the worldwide marketing campaign for Thunderbirds and have been signing more agreements and TV deals. To update on this will take quite a while and I do not yet have the details of the New York Toy Fair that Carlton went to this week. I will post at a later date a more detailed Thunderbirds worlwide rollout and the UK Easter campaign.

Well I think that summarises the last 30 days pretty well. Whilst the share price has collapsed SCi have continued to build the buisness, we may or may not have seen the bottom yet but one thing is for sure it will not stay at these levels forever.

F.A.B.
Chris