Saturday, November 10, 2007

Lead-Free Christmas : Xbox 360, Playstation 3, Wii

With all the news about Chinese-made toys containing lead and other toxic chemicals, I can't help thinking that the beneficiary of this widespread problem will be the major video game makers this year - Microsoft with the XBOX 360, Nintendo with the Wii, and Sony with the Playstation 3. I have no idea if the game consoles, controllers and other accessories, and the CDROMs for these game units are perfectly chemically-free, but it seems a bit more likely that they will be lead-free than anything that is covered with Chinese paint these days.

I'm looking at this from two angles as well:
  1. what can people "safely" purchase for their families this Christmas season, and
  2. how will such purchasing decisions affect stock prices?
It is only my personal opinion, but I am assuming that companies like Microsoft (NASDAQ:MSFT) will show some direct benefit as people move towards the XBOX 360, as well as towards computers in general as a gift option (since Microsoft makes the operating systems that appear on nearly all consumer-oriented PCs). There are plenty of PC-Based games out there for all ages. Next, there is Nintendo (OTC:NTDOY), which is a nearly pure video-game play, but must be purchased as an ADR (American Depository Reserve) stock since it's native trading location is the Nikei / Tokyo stock exchange. Likewise, Sony Corporation (NYSE:SNE) is an ADR, and will likely show very little video-game-sales effect since the PlayStation doesn't make up a very large part of their total revenue.

Another angle to consider is the game retailers in general. "Traditional" game stores like Toys R Us or whatever are bound to have a challenging time with all this Chinese lead paint recall news, and I think that electronics retailers like Best Buy and Circuit City may end up reaping a large (sales) benefit from this situation, but will their stock reflect it? Prior history would seem to indicate otherwise, at least for the short-term following the big post-Thanksgiving holiday shopping weekend. In fact, when I looked at the charts, it seemed as though quite regularly the "pattern" would be over-optimistic investors would cause the stock to hit a short term "peak" price the day before Thanksgiving, and then nearly without fail, in the coming week the stock would fall (as, presumably, over exuberance was tamed repeatedly with less than stellar sales reports from retailers during Black Friday). But, that aside, perhaps someone like (NYSE:BBY) could still show long-term benefit.

All I know is that right now, from where I sit, I see all the "cool" products being electronic ones and anything that is "safe" from a lead-free perspective. I'm not in tune with what anyone buys for young people though (under teenage years especially); perhaps clothes this year... got me. But, for teens on up, I'm thinking electronics (and video games in particular) will be quite a hit this year.

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