Initial coverage :- executive coverage. April 30 2008.

makes an intresting read :)

uniteconomics.com/files/Funcom_Initiation.pdf

So what did they expect :-

we expect Age of Conan to have 546,750 subscribers
at the end of Q2. Our earnings estimate for Q2 is for a breakeven result, as Age of Conan is launched
more than midway through the quarter.
We project that 10% of the initial subscribers will stop their subscriptions in Q3. This will be more than offset
by expected game sales of 120,000 in July, 80,000 in August and 60,000 in September. Once again, we expect
that only 80% of the purchasers of the game will become subscribers past the first thirty days of their purchase.

At the end of Q2 2009, everything should change. Funcom is expected to release
their first expansion pack, We expect 200,000 new unit sales in July 2009 for the PC, followed
by 90,000 in August and 60,000 in September - ending the quarter with 1.05 mln PC subscribers.

intresting info for people working out costs :-

Under the distribution agreement for Age of Conan in place with SCi/Eidos, Funcom will not receive any of
the proceeds from the physical-world sales of the game.

Funcom will pay a royalty for the use of the Conan name, estimated to be 6% of subscription revenues, which will be included in operating expenses. In addition, Funcom has outsourced server farms for the game to IPsoft, a global outsourced network and systems infrastructure support company whose client list includes Time,Canon, Revlon and Macy’s.

The cost for server outsourcing is believed to be $2.00 per subscriber per month.
In addition, Funcom is outsourcing customer service and support functions for Age of Conan. This ‘Live
Team’ is expected to cost just over $2.00 per subscriber per month. Marketing costs for Funcom are expected to be 14% of total sales.

The total variable costs for Age of Conan subscribers should be $7.50 per subscriber
per month.

That's a beautiful document.  I have another private prospectus that i've shared portions of on here.

I'm going to amalgamate the two and come up with something harsh for failcom.net.

Eitherway no, they missed those targets substantially. 

I love it!

Lit

Yes i thought so mate,

Well i was supprised that funcom made  ZERO from box sales, there revenue is only from a percentage of subs.

wouldnt like to be in there shoes and yes they droped a right bollock on there expectations.

So all those interviews where they claim we never expected so many subs ie 400,000 yes you bloody expected alot more.

 You know that this is a financial analyse from another company and not a Funcom report?

All this is made from numbers they find in sources open to the public. The analyzing part uses that information and try to make an estimate of what to expect in the future. This is normal to do on companies that are registered as a public traded company.  And since they dont have any "hard information" many of these analyzes hit way off target.  

" We contact company management for CFO-level
discussions of cost functions, capacity utilization and business
outlook, further refining our thesis.

They also deal with funcom, thanks for your misguided info though.

There are two pieces of information that are really noteworthy

The first is something we already knew on here (but is not common knowledge).. that is that Funcom receives about 20% of retail box sales in the US, and slightly less in Europe.     What this means is that people are wrong when they say that Funcom made 50M just selling boxes.   8M is more like it.  I read one post on the forums where a person said that just the box sales of AOC will fully support their next game.

The second part is that just keeping servers up (and paying for bandwidth) is a significant portion of the monthly subscriber fee.   In UO, I remember a dev stating that the cost was roughly 60%.   In this report, it looks like it is closer to 50% for Funcom. 

The final thing to note is that probably some institutional investors used this  writeup as a basis for valuating the stock price, which is why it was at $55.    Since 1M subscribers would warrent a price that high.  Cut the subscribers down to it's current 150k, and you have a stock at $7 per share.   There are probably a bunch of people holding the stock because they don't want to have to report the loss yet.  It is common for 'dogs' to be held and then unloaded near the end of December.  Another thing propping up the stock is the expiration of employee stock options.  When stockbrokers value a  stock, they have to expect that the majority of stock options will be exercised (thus diluting earnings).  When a stock tanks like Funcom did, basically it means the stock options given to employees are now worthless, and thus the price of the stock doesn't drop as fast as it normally would since each outstanding stock share controls a bigger portion of the company.

I also find it really funny that they anticipated 575k  SUBSCRIBERS, yet they reported 415k CUSTOMERS.  It was clear that Funcom did something that no other compeny did, and that is include people who are in their free 30 days, and also including people who have cancelled, but still have time remaining on their account.   Companies like Blizzard always remove those players from their 'subscribers' numbers.

The bottomr line can't lie though. They were expecting to break even, yet ended up with an 8M loss.

I have another prospectus document such as this...and although that document is still very good, they are wrong about the distribution.  It did not all go to Eidos.  Funcom received approximately 19% of box revenue (the number is actually 18.6%...they received 10% of regular edition boxes, 25% of collector's edition boxes, and the majority of the digital download revenue.) 

The other information is really good though.  Especially the information on the server costs and such. 

Originally posted by Bazanko

" We contact company management for CFO-level
discussions of cost functions, capacity utilization and business
outlook, further refining our thesis.

They also deal with funcom, thanks for your misguided info though.

They will not get any information already known by the public. Funcom is publicy traded on Oslo Børs(Oslo stock exhange) and therefore are not allowed to give any information that might affect the stock price to others before Oslo Børs gets the information. 

The information the report are using are all public known. Alot of the report is just guessing/analysing etc.

If you want to get the real estimate you should read the outlook on q2 made my funcom and reported to Oslo Stock exchange. 

 Check http://www.newsweb.no/newsweb/atmnt/080630_Funcom+Update.pdf?id=56675

That document show what funcom expected from q2.  So stop reffering the the OPs document as a Funcom statement.

Then you can compare it to the actuall q2 report http://www.newsweb.no/newsweb/atmnt/Funcom_Q208_report.pdf?id=57795

If you want more financial analyst of Funcom as a company you also might look at what DnBNor say about it. They have a targeted price on 25 NOK. Others say 100NOK and some say 40 NOK and some say 15 NOK. By todays stock price they were all wrong. 

Also remember that they are trying to find out what the "real" value of the stock is in the future. And they use a PEx20 and that might be high for norwegain conditions but in international standards it is what they use on these kind of comanies.