This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Next Generation's Software Growing Pains

With three new game machines expected in the next year -- and two new handheld game devices already on the market -- this is a great time to be a gamer.

What remains to be seen is whether it will be a great time to be a game maker -- or an investor in such companies.

The launch of Microsoft's (MSFT - Get Report) Xbox 360 this week will inaugurate the latest console cycle, a ritual that begins every five years or so. Each successive cycle has eventually led to bigger sales, bigger profits, and surging share prices for the top players.

( this week also looked at how Microsoft's rivals will cope with the ballyhooed rollout; how far Microsoft will make it into consumers' living rooms ; and what a game is worth .)

But in the short term, the transition to new machines typically means trying times for makers of game software: slowing sales, rising costs, and stumbling stocks. Worse yet, the transition can also be the beginning of the end for weaker companies that just can't afford to keep up.

For investors, then, making money off the transition becomes a game of timing and educated stock-picking.

Count Joe Spiegel, a hedge fund manager at Dalek Capital, among those who believe it's too early to invest in the game software companies based on hope about the next-generation consoles. Sony (SNE - Get Report) and Nintendo won't come out with their new machines until next year and Microsoft will sell only a limited number -- likely fewer than 2 million -- this holiday season. That's too small a base of users to really boost software companies' results, or their stock prices, he argues.

"People may be getting too excited too soon," he says. "If you're looking at making investments based on next-generation for results this year, you're making a mistake. You're being blinded by hype."

But other investors say the time to jump on the next-generation train is either now or soon approaching. Even if sales of next-generation games won't be meaningful until sometime next year or beyond, stock prices will likely soon reflect expectations of those sales, if they haven't already, says one fund manager, who asked not to be named.
1 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
THQI $0.31 0.00%
ATVI $34.47 1.68%
MSFT $49.87 -0.06%
SNE $24.10 -0.66%
TTWO $34.18 -0.47%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs