World of Warcraft Gets Some Press in Barrons

Nice article on Vivendi which makes several references to World of Warcraft. Luckily NCTY (The9) is not mentioned - maybe I will still get my entry point? We'll see.......

Here are some choice snippets (any emphasis is mine):

"Though a much smaller piece of the empire, VU Games has been transformed from a loss-riddled operation to a profitable one thanks to World of Warcraft, which is expected to generate around $250 million in cash this year as game geeks around the world pay an average of between $15-$25 a month to spend an average of 25 hours a week on the role-playing game. Given its success with World of Warcraft and its strong growth prospects, industry analysts say VU Games is worth $2 billion to $3 billion and should receive a much higher implied multiple than its current three times cash flow. In contrast, Electronic Arts (ERTS), a major games developer, trades at about 20 times cash flow. About three years ago, the games division was on the block for about $600 million and no one wanted to buy it. Now it would fetch a much higher price though it's not for sale. "World of Warcraft has turned out to be a bonanza beyond all belief and it could get better," says Cumberland's Wallach."

"The Internet is already a key to our operations right now," he continues. "Take World of Warcraft as an example. There would be no World of Warcraft without broadband Internet access. For TV applications, or for games applications, or music downloads or other interactive applications, the development of broadband Internet is the key to our future growth. Broadband Internet today is in less than 35% to 40% of U.S. homes. It is less in many European countries and much, much less in nondeveloped countries. So we will grow as the penetration of broadband Internet and mobile Internet grows."

I have said it before and I am going to reiterate now so that everyone including the "experts" on the Chinese internet sector can hear it - the most intriguing part of NCTY is the fact that there should be little distortion in NCTY earnings over the coming 2 years by other games. If WOW succeeds in China, so will NCTY and its stock price.

I think this is a good bet to make and I think that NCTY is at an attractive valuation now - and may become more attractively valued over the coming weeks prior to 11/10 earnings - especially if we take into account - the broader market.

I have read numerous commentaries to the extent with NCTY - such as "wait and see" or "they need more than one game" or "Chinese gamers might not like WOW as it is too western." All cultures that I have ever come into contact with - and those include - Chinese, Korean, USA(whatever that means), White, Black, Hispanic, European - have loved Blizzard games. WOW looks to be no exception to this.

So now we can wait and see - but don't say that I never brought this up. I was pounding the table on SNDK and I am pounding the table on this one now.

Regards,

BG