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URL:  http://boards.fool.com/you-know-i-didnt-see-any-new-information-coming-22657073.aspx

Subject:  Re: Hip Interactive ( HP.TO ) Date:  6/23/2005  8:24 AM
Author:  fakena Number:  1974 of 3296

You know I didn't see any new information coming from those loss numbers, but now I see a reason for doubting their will be no more profits coming in from that National Post article.

"Gear and games - that's where the future lies, that's what the strategy is - those are the high-margin businesses."


Yeah this has been the strategy for over two years now, except it was the distribution "cash cow" that would provide the funds to speculate on publishing titles and paying a manufacturer to build large production runs of gear to their "Hip Gear" designs.

So if the head guy at Hip doubts their will be any more profits coming from distribution, there will be no more investments into publishing or gear made unless someone loans them cash or purchases a large block of shares. And to get $20 million now in equities it'll dilute shares enormously now. I can't believe Arindra wouldn't foresee a bounce back in margins and revenues when the next console generation starts cycling, but I guess I'd have to trust his judgement. And if I couldn't trust his judgement than I probably wouldn't want to own shares in Hip.

If its with regard to distribution then that write down may be real complicated as acquisition of LSP(Hip Europe) included distribution activity but also the personnel acquired were seen as invaluable into the future of Hips publishing and licensing efforts. Goodwill in total of almost $9 million but the acquisition cost was less than $2 million. I don't think the goodwill was apportioned to any particular activity or personnel at the time it was booked. Also over $4 million in goodwill attributed to purchase of SJS distribution pertaining to the preference shares granted at no cost but as an earn-in according to earnings provided. The shares were then converted into common and booked at the then market value of shares.

My dime price buy-in yesterday missed and it looked like shares were almost going to rise to a level that that buy would have covered the loss from current holdings. So it was disappointing that I missed buying more, however; now I'm not sure that I want to risk more cash on the company. Not if Arindra believes that the key "cash cow" of their distribution business won't be able to fund the higher net margin efforts anymore. Maybe thinking about an exit price for current holdings may be better thought time spent.

Duane
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