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Author: foolSocrates One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 1219  
Subject: Baffling Downsizing Date: 12/30/1999 2:20 AM
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Hasbro has me baffled. Some of my bafflement is probably related to my rookie status as an investor. I still have lots to learn and there are things that I am very uncertain about.

But following Fool teachings, I have gained a lot ground in this last month or so of online financial browsing.

First off, I think Hasbro is a great company, with tremendous branding and owns so much that is dominate in its sector. But Like many other fools, I am curious about this stock and why is isn't doing better.

I look at the financials and they seem to have very good cash flow, good price/earnings ratios and they seem to pass the muster in other number crunching calculations that the good Fools are teaching me to exercise on evey stock that I am planning to purchase with my hard earned cash.

But the bottom line numbers concern me. I feel Hasbro has the potential for being a much richer stock, one worth holding for a long time to come.

However, their actions their actions seem contradictory to their stated directions.

Observation number One:

The recent downsizing of 2200 souls worldwide disturbs me. The main reductions were to plants outside the US, Mexico and England. But I have heard absolutely no information on exactly what was manufactured at those plants. I am curious as to what was being eliminated.

Observation Number Two:

This downsizing also included the closure of the Microprose site in North Carolina. Everyone there was "let go" I did not see any mention of that site in their official press release. Even more distrubing, Microprose and the talent assembled there are active in the gaming/interactive/high tech market sectors that Hasbro says they are moving towards. Why eliminate talent that you need to grow the parts of the industry that you are moving towards? This seems to be a tremendous contradiction.

I have a strong opinion on what it takes for a company to be a meaningful player and strong leader in the Gaming Industry.

The would have a core technology team that is internal to the company. This team would be long term in the commitments and goals for state of the art gaming products. That is why the team must be internal and not outsourced. Ownership for company and the people working on the core technologies are key to being world class leaders in this arena.

I read somewhere that Hasbro is spending 50-60 million to build game.com their internet gaming center. That suggest a lot of money for setting up web server hardware to deliver the gaming content. Lots fo technical people to handle the transmission functions, the gaming engines to drive the content of the Monopolies, the tools to drive the software, and the artist and media people to define game content and interface.

I would appreciate hearing more particulars on the methods Hsbro plans to use to get to this goal. I also wouldn't mind being a part of making it happen <BG>.
They've struck deals to get their properties running on some existing internet game playing sites, but I would like to see them controling as much as possible the technologies, hardware, and intellectual properties associated with this project.

If hasbro is planing on following Electronic Arts business methods of outsorcing projects, investing in companies that look promising, then I think that is the wrong model for them to mimic.

This doesn't sem to fit the goals of online gaming. Plus (and I keep coming back to this) Hasbro has all these wonderful properties that need to be nutured for their long term interests. Outsourcing can cheapen a products image, mainly because, in the interest of making clinet deadlines, a temendous amount of control is reliquished to outsourcing firms.

So, to me, its crucial that Hasbro have an internal technical crew, and given the scope and timeline for bringing this bigtime, game site the crew better be very good at what they do, and Hasbro better be payimg them comfortably and well.

I am very close to buing Habro, I think it is a stock tha should be trading in the mid 30s. But without knowing more particulars on how they plan to grow in interactive gaming environments, I am having a hard time finding the higher confindence in placing an order.

-John
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