Thursday, February 14, 2008

Obsolete week continues: 3DO

Do you remember 3DO? If so, you are either a hardcore video gamer of a certain age or you might be one the folks I used to work with from the business who show up here from time to time. In the early 1990s, Electronic Arts founder Trip Hawkins started a new company to make video game hardware, as opposed to software. 3DO was going to compete against the latest cool platforms, which Wikipedia now identifies as the fifth generation hardware. Other entries in the market included the Atari Jaguar and Sega Saturn, but the two winners in this generation would be the Nintendo 64 and the most anticipated release, the Sony PlayStation.

I was working at EA when 3DO was founded, and before the box had even been released to the public, the company had its initial public offering, or IPO. The amount of stock to be sold and the price it would open at, $15 if memory serves correctly, would mean the company would get a cash inflow of about a quarter billion dollars. 3DO made a special deal and let EA employees buy stock before the public could, at the asking price and stock that could be resold as soon as the IPO hit. Most of my co-workers bought as much as they could, which I think was about 1,000 shares each.

I say think because I didn't buy. In fact, I wrote a very well reasoned e-mail and sent it out warning people about the IPO. I had been at Activision in the 1980's, and their stock had not done well. Moreover, another IPO at about the same time as 3DO's was Robert Mondavi, who was also selling a quarter billion dollars of paper that said you owned part of the company. How could 3DO, which hadn't sold a single box yet, compare itself to Mondavi? A complete upstart company going into a competitive field was a better investment than an established company with a good reputation and outright owner of some of the most valuable real estate in the world?

Well, guess what? 3DO opened at $15 and shot to $45 by the end of the day. Anyone who bought the stuff and sold it then tripled their money. The high went to over $50 within a week. Mondavi's initial offering did very badly early; it dropped to about 50% of the opening day asking price within weeks. Matty Boy, Investment Advisor to the Stars*, was born, giving well-reasoned financial advice that is usually 180 degrees off.

In my defense, within a year Mondavi was at double the original number and 3DO was in the tank and would never get better. Not that I put a dime in either one.

*Matty Boy knows no stars, and his investment advice, well... he's better at math.



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2 comments:

pissed off patricia said...

Look at it this way, you didn't lose any money. That's what I tell myself when I don't buy a lotto ticket.

commander other said...

3DO always struck me as doomed from the start. i think you were right. things in that industry are really hard to predict, and always have been.

like NVidia's take over of Ageia.