06-21-2012, 06:23 PM
(06-21-2012, 05:26 PM)Caffeine link Wrote: [ -> ][quote author=matter11 link=topic=3603.msg247955#msg247955 date=1340314871]
Its been proven time and time over, that investors do not value conglomerates. While EA focuses on one industry, video games, it is still a conglomerate, having divisions and sub-companies in nearly everything except for hardware (eg. their own console).
Now there's not necessarily anything wrong with some of this, Nintendo comparably does hardware and has its own (and several other) development studios. But the problem with EA and where it is different, that company listed on the market is effectively just a holding firm.
The problem with a holding firm is if one division suffers a massive loss, it can contaminate profits from others. Let say Bioware was independent, and DA2 and ToR were huge failures, very big losses, they would fold up shop, and other studios like say Maxis or Westwood wouldn't even skip a beat.
Now where you have Bioware tied to those other studios, suddenly it hits the bottom line of the holding company where everything flows to. Now you have the other divisions propping up a failing one or making up for the failure.
As an investor if I want a 'game developer' portfolio, I can go buy stock in several studios and build my portfolio and risk exposure exactly how I want them to be, if I buy stock in a holding company, they make that decision for me, and its not always going to be the one I am going to be pleased with.
There is definitely value to horizontal or vertical integration, but with respect to the gaming industry and without going too far in depth, it is not something investors value and each acquisition can actually detract from the overall value to shareholders.
</Investing Knowledge Lesson>
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Shit, -50 dollars for EA shares? I'll take ALL OF THEM.