Investor snapshot: EA, EB volatility stuns game sector

Game concerns ended sharply lower Tuesday following an analyst's memo that downgraded Electronics Boutique's (ELBO) stock rating, and news that one law firm is going after Electronic Arts (ERTS) for last week's tumbling stock prices.

Shares in Electronics Boutique fell $3.77 to $43.25, not quite erasing yesterday's spike. Michael Pachter, an analyst with Webush Morgan Securities, issued a memo Monday afternoon in which he lowered his ELBO rating from "buy" to "hold," and maintained his $46 price target for the retailer. This countered yesterday's memo from PiperJaffray analyst Anthony Gikas, in which he upped the company's rating to "outperform" and its price target to $50. Pachter's lowered rating came after "recent share price appreciation has pushed the company's valuation to the high end of its historic range," he wrote. "We are maintaining our estimates and remain positive about the long-term prospects for the company."

EA shares slid $1.60 today to $52.42 following reports that the Philadelphia law firm of Schiffrin and Barroway intends to bring a class action lawsuit against the game publisher alleging it hid problems that led to the company's lowered earnings forecast--and subsequent share-price drop--last week.

Nearly the whole game sector suffered today, including Take-Two Interactive (TTWO), whose share prices declined $1.26 today to close at $38.84. Shares in THQ Inc. (THQI) were trading $1.06 lower at $27.31, while GameStop Corp. shares were down 85 cents to $22.57. Activision (ATVI) shares lost 59 cents, closing at $15.57, and shares in Jamdat Mobile closed 56 cents lower at $17.25. Shares in Konami (KNM) were 30 cents lower, closing at $22.29. Vivendi Universal (V) and Eidos (EIDSY) shares lost pennies each.

Just two game companies came out ahead Tuesday. Atari (ATAR) shares rose 9 cents to $3.10, and shares in Midway (MWY) were trading 6 cents higher at $10.48.

In the overseas markets, Nintendo shares closed 60 yen (56 cents) lower Tuesday at 11,420 yen ($106.35) on the Japanese exchange. In Paris, shares in Ubisoft declined .50 euros (65 cents) to close at 29.50 euros ($38.16).

Among the US indices, the Dow Jones Industrial Average slid 79.95 points to close at 10,405.70. The Nasdaq Composite Index fell 18.64 points to 1,973.88, and the S&P 500 closed 8.92 points lower at 1,165.36. According to Marketwatch, MCI accepted a buyout offer today, after a lengthy bidding war between Verizon and Qwest. Verizon came out on top with a $7.6 billion offer. MCI shares climbed 3.7 percent.

In the foreign markets...
Asian exchanges, reeling from a dismal economics report and a massive Indonesian earthquake, finished lower Tuesday. In Japan, Sony's stock fell 2.5 percent following news that US courts had upheld an order compelling the electronics giant to pay $90.7 million in licensing fees to Immersion Corp. The penalty was imposed for violating Immersion patents on technology Sony used to create its PlayStation consoles and other products. Europe's markets closed slightly higher.