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No. of Recommendations: 5
The board is correct, this is not a new venture. Based on what I know, JAKK is allowing THQI to use the license to WWF owned by JAKK to develop a video game. Based on yesterday's conference call, the game is expected to be in stores within 30 days.
It is intersting to note that, based on the IBD article of about a week ago, the WCW game currently dominates the market despite the fact that the overall popularity of the WWF is greater than WCW. The writer of the article explained that the success of the WCW game is attributable to the lack of a quality WWF alternative. Apparantly, Acclaim had a WWF game that was not very good.
The analysts acknowledge that the new THQI/JAKK WWF game has received rave reviews and some call it the best fighting game ever made. Thus, many analysts expect the WWF game to take over the fighting game market.
Unclear, however, is how JAKK will benefit. During the conference call yesterday, many analysts asked what JAKK would make on sales of the game. Managment would not answer beyond saying that THQI would book the revenue from the sales of the game, but that JAKK would receive a preferred return with a guaranteed minimum from THQI. Apparently, the deal between JAKK and THQI is governed by a confidentiality agreement. Beyond that, all management would say was that the deal was very good for both companies.
One analyst speculated that by allowing THQI to book the revenue, JAKK would receive a greater return than originally anticipated and that the guaranteed minimum return was higher. Management would not (and could not) comment on that speculation, but based on the very conservative management style, I suspect the analyst was on target.
From all indications, sales of the game are expected to be very strong and, if so, JAKK should benefit tremendously.
Originally, I bought JAKK with the expectation of owning the stock for a relatively short period (6-12 months). However, after listening to the conference call, seeing the strong growth, noting the fundamentals and lack of debt, and listening to the enthusiasm and long term strategy of management, I believe this company has the potential to be the next Mattel or Hasbro. My outlook has shifted to long term. This is a quality company and insider holdings are strong. I expect great things here.
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