Guysdownloads are irrelevant to DES's EBIT today, and probably...

Guys

downloads are irrelevant to DES's EBIT today, and probably as far out as next 2-3 years.

Whilst interesting and curious, it makes no tangible difference to bottom line. DES is NOT an online company, it is a digital (physical) company, as that is where the revenues are derived.

As for QFX, they are also an online physical company. Faster broiadband speeds makes no difference to THEIR business (24kb images of DVD's to be posted to you load either instantly at 1Mb/s or 24Mb/s to the naked eye -so DSL or DSL2 makes no difference).

The point here is that QFX now needs 100k subs to BREAK EVEN, when as recently as Dec it was touting it needed 45k subs to BREAK EVEN, and that it was halfway there at 23k subs (now 28k?).

The $5m raised some few months ago wont last, as they are burning $1m per quarter to feed the losses, which will continue unabated until 100k subs.

This means QFX will need to raise more money:
That means DES will need to chip in more money, or be diluted.
Impact of that is reduced QFX Share Price
Impact of that is it will reflect on DES badly either way.

Given that it has taken QFX 2 years (and an acquisition of 10k subs ex Homescreen) to get to 28k subs, do we assume another 2 years to get to 100k subs.

Note that losses increase exponentially, not linearly, as the more subs, the more they need to spend on CAPEX for new titles, in order to have a reasonably supply/contention - or they risk losing subs. Given the slow turnaround of 7++ days on each title (utilisation), they are already some 7 times down on what a local video store can generate revenue wise per title (or how many subs can be serviced per title if you like)

So, QFX will need to raise a further 10-15m to keep this thing going to break even. At a market cap of $11m today, and assuming that market cap will DECLINE once analysts work this out, then DES is onto a real loser here.

Not rocket science