diskusbooks Chapter 185 The Twisted Wall Street Mindset
Chapter 185 The Twisted Wall Street Mindset
Chapter 185 The Twisted Wall Street Mindset
(I had an upset stomach yesterday morning, which led to gastroenteritis and a fever, and I was hospitalized. I'm feeling much better today, but I still need an IV drip, so typing is inconvenient. I can only update as much as possible. Please forgive me.)
In sunny San Jose, the booming development of technology fills the city with vitality and opportunity.
Leap Games is like a rising star in the gaming industry, shining with a unique brilliance.
This game development company, which was virtually unknown just a year ago, is small in scale with only a few dozen team members. The few small games it released failed to make a splash in the market.
But after Ernst acquired it, it unleashed tremendous potential and underwent a dramatic transformation.
Their first game, Counter-Strike, caused a sensation in the gaming community and attracted a large number of loyal players.
Many gamers even say that there are only two games in the gaming world: Warcraft and Counter-Strike. While this statement is a bit of an exaggeration, it does reflect the status of Counter-Strike in the hearts of players.
Warcraft was the pinnacle of single-player games, while Counter-Strike ushered in the era of online games, achieving astonishing market performance.
Four months after its release, Counter-Strike's sales exceeded $4.2 million, shattering the worldviews of both the financial and gaming industries.
So what about World of Warcraft? Even the most profitable online game before it never reached such terrifying revenue.
"But everyone knows that this data is inflated, and we can't extrapolate Counter-Strike's annual sales based on the current sales figures."
Inside a coffee shop in San Jose, Fao Martinez, the vice president representing Morgan Stanley in the negotiations, put down his coffee cup and said with dissatisfaction.
It's no secret that YueDong Games previously held a major promotion, which boosted game sales; it's not hard to find out.
In the first two months, Counter-Strike's sales exceeded $3.3 million, but now, four months later, sales have only reached $4.2 million.
In other words, Counter-Strike's sales figures over the past two months are less than $90 million.
In fact, this figure is already extremely exaggerated. According to Wall Street's assessment, it is almost a certainty that Counter-Strike's annual sales will exceed $6 million.
Despite the immense popularity of "Warcraft," its sales forecast for this year is only between $1.5 million and $2 million.
But that's not how you calculate it. While sales volume is important, profit is even more crucial.
Warcraft is not an online game; it sells the game itself.
The cost of selling each game is only the price of the disc, which is negligible.
But Counter-Strike is different; it's a free-to-play online game, and many players are playing it for free.
However, YueDong Games needs to pay a lot of money for these people's internet fees, storage hardware costs, etc.
Therefore, after deducting fixed costs such as development and labor, Counter-Strike's profit margin is definitely lower than Warcraft's.
It is far inferior to that.
"It seems that Ernst's valuation calculation is based on Blizzard, but in reality, he is playing a word trap with us."
Across from Fao Martinez, Claude Davidson, a representative of Lehman Brothers, spoke.
Generally speaking, the first thing to look at when valuing a company is its price-to-earnings ratio.
But if that's the case, then Wall Street is just a fool being played by Ernst.
Blizzard's current market capitalization exceeds $37 billion, and its net profit for this year is estimated at $1.9 million.
What about YueDong Games? They projected a net profit of $1.84 million for the first half of the year.
According to Ernst's calculations, the annual net profit would be around $3.7 million, which translates to a price-to-earnings ratio of $72 billion for Blizzard.
"Do they really think everyone's a fool?" Claude Davidson growled angrily, recalling the image of Ernst standing in front of them two hours earlier.
"In fact, you've already gotten a super bargain. If YueDong Games had gone public, its current market value would be 72 billion."
"A hundred million US dollars. But I'm giving you a super discount; YueDong Games is valued at only 40 billion US dollars. Once YueDong Games goes public, your investment will immediately double."
The more Claude Davidson thought about it, the more he felt that Ernst was treating them like idiots.
The price-to-earnings ratio (P/E ratio) is important, that's true, but it's not about relying solely on the P/E ratio.
Why are Blizzard's profits so high? It's because Blizzard invests heavily in research and development.
If you only look at revenue and exclude R&D costs, YueDong Games simply cannot compare with Blizzard.
And what about the $1.84 million net profit in the first half of the year? Everyone knows how that impressive report was produced. Who can guarantee that there will be a net profit of $3.7 million for the whole year?
Another aspect is game development. In the first half of the year, YueDong Games launched several game projects, which are currently in the early stages and haven't cost much money. However, things will be different in the second half of the year.
Let alone a net profit margin of $3.7 million, it's hard to say whether YueDong Company will even have a net profit this year.
But it is precisely this lack of profit that puts them in a dilemma.
No profit means more investment, more projects, and more future.
What makes that man so confident in challenging Wall Street's bottom line time and time again, forcing Wall Street to bow down and submit each time, and accepting his high valuations?
It's because that man has never failed and has always brought huge returns to investors.
Both of them are shareholders of Google. Although they were forced to compromise and could not participate in Google's management at the time, they were not completely unaware of the internal situation of Google.
Google Search and Gmail are two examples of services that are constantly increasing their market share.
And now Wall Street knows about Google's TURN project. Ernst's prediction of creating another Google was not just empty talk; they saw the potential.
Furthermore, Google's long-hidden GG system is now showing some signs of deception.
The relocation of the new headquarters and the establishment of Google's data centers provided Wall Street shareholders with a great deal of useful information through financial statements.
According to Wall Street insiders, the scale of the data center Google has built seems a bit too large. With Google's current backend data, only one-third of that size would be sufficient to meet Google's current needs.
We all know that hardware devices are constantly evolving, and the same price will not guarantee the same hardware specifications this year and next year.
Is Google stupid? Why would it spend such a huge amount of money to build a massive data center that it will never use?
surely not.
Then there's only one possibility: Google's GG service is about to launch.
The establishment of such a massive data center demonstrates Google's confidence in its GG business.
The larger the data, the more GG has invested.
"It's tough," Faio Martinez sighed.
He had worked on Wall Street for 21 years and had never seen such a perplexing company.
The price was too high, and they were unwilling to give up their investment. Every time they invested in Ernst's companies, the outside world mocked Wall Street for being a sucker again.
If you don't invest, you might regret it for the rest of your life.
Ernst's businesses have indeed yielded huge returns, without a single surprise, at least for now.
And just because you don't vote doesn't mean others won't vote either.
Most importantly, the investors were ecstatic. After the incredible turnaround of Titanic, Ernst's name resounded throughout America.
Investors in the market are all waiting for Ernst Enterprises to go public. If you don't have shares in these companies when they go public, it will be inevitable that some high-net-worth clients will leave.
"Let's talk it over slowly. What other options are there? Everyone knows that asking for an exorbitant price and then trying to haggle is impossible."
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