Chapter 11: Acquisitions and Mergers

For five days, they enjoyed the slow journey up the inside passage through Southeast Alaska and across the Gulf to Anchorage before turning around and making the return, stopping at different ports. By the time they stopped in Victoria, B.C., for the night, they were ready to get off the boat and back home. The following afternoon, they disembarked in Seattle and eagerly drove home to find a new garage waiting for them. After unpacking and settling in, Peter scanned through two weeks of the Investor’s Business Daily. He learned the answer to his question about Costco in that morning’s issue, dated April 19th.

Costco beats Q2 estimates. Announces 2:1 split.

He read the article twice before logging onto his E-trade account. Trading was closed for the day, but he still held all his contracts. Effective May 16th, he’d have 2000 JUN 22.5 Calls, 2000 23.75 Calls, and 2000 25 Calls—all trading well in the money. His common stock would double to 22,000 shares. COST had gapped up by $2 in after-market trading.

“Good news, baby?”

He blinked and turned to find Kathy leaning against the door jam, curiously addressing him.

“Pardon?”

“I can see the dollar signs in your eyes when you are pleased with something,” she answered as she sauntered over to sit in his lap. She recognized his portfolio on the monitor but only glanced at it. “Are we still rich?”

He wrapped his arms around her possessively and kissed her bare shoulder. “And then some, babe.”

Later, he went to the kitchen and enjoyed preparing a simple dinner of lasagna and salads while his beloved sat at the kitchen table sorting the mail that Cousin Eddy had collected for them. She read aloud a card from Allister and Monty, trying to mimic their British accents as they thanked them for the ‘marvelous’ and ‘bloody brilliant’ gold nuggets Peter bought and shipped to them at their residence in ‘Faversham, nearer to Canterbury.’ He laughed at her speech as he layered the noodles in a casserole dish.

“Hey babe,” she said moments later as she scanned another letter. He turned at her bewildered tone. “We got a letter from Electronic Arts Games.”

‘EA Games?’ he thought. “What does it say?”

“It’s addressed to you as CEO of PAAK, LLC,” she began, “Dear Mr. Shipley, I hope this finds you well. I am Desmond Sothmeyer, Vice President of Marketing and Acquisitions for Electronic Arts Games, Inc.

“Regarding your new game ‘Village SIM-station,’ which was brought to my attention by our product review board—we would very much like to discuss the pending release of your product and its alignment with our endeavors.”

“He asks that you contact him, and he provided his number.” She stood beside him as she read the letter aloud. She snatched several black olives from the cutting board before he could slice them and turned her back to the counter. “What do you think?”

“How did EA’s product review board get a demo copy of the game?” he wondered. “Not that I’m complaining ... It must’ve been Arty. We need to call him and find out.”

Kathy took out her cell phone and dialed his number. “Hey, Carrot-top, this is Kat. I’m putting you on speaker,” she barked and set the phone on the counter between them.

“Uh ... okay,” Arty replied groggily. “What time is it? How was your cruise?”

“The cruise was awesome; you should go on one. Fresh air would do you wonders,” Peter smirked. “What’s up with this EA Games letter?”

They heard him shuffle and envisioned him reaching for his spectacles to put them on his head. “Did they get back to you?” he blurted excitedly.

“I got a personal letter from the Vice President of Acquisitions.”

“Whoa, really?” their new partner gasped. “Holy ... shit! I mean ... wow!”

“Did you send them a demo?”

“Well ... yeah,” he stammered over the phone. “I mean ... I can do that, right?”

“Shit yeah, buddy. I appreciate the initiative. I can’t believe a big player like them is interested in our stuff.”

“EA doesn’t license other peoples’ games, do they?” Kathy asked.

Peter shook his head. “I think they credit the programmers, but everything they market is their property.”

“Do you think they might want to buy ‘Village’?” Arty asked.

Peter replied, “They’re certainly interested. I’m curious about his mention of the ‘alignment with their endeavors.’

Silence for several seconds. Then, “Oh fuck,” from the speaker.

“Yeah,” Peter replied calmly.

“What?” Kathy demanded, irritated by their subtle byplay. “What does that mean?”

Arty answered hesitantly, “It means we think they may be working on a similar game platform.”

“Yeah, so?”

“If we built a product similar to something they are developing, then they may want to quell us to prevent a conflict or market share competition,” Peter replied grimly. “Arty, I need to call Al, right now. Talk to you later, bud.”

“But—”

He hung up on the red-haired geek and dialed his best friend’s number. Alan didn’t answer, so he left a message.

“Dammit!” Kathy grumbled, pacing to the table and plopping into a chair. Her elbows thudded onto the table as she rested her chin on her fists. “I’ll be so pissed if we did all that work for nothing.”

“I think you’re reading too much into this,” Alan said later that evening after Peter read the letter to him over the phone. “If they were concerned about infringement, you wouldn’t be getting a personal letter from the Vice President. Anytime you deal with copyrights and trademarks, lawyers get involved, and they aren’t so pleasant.” He was in the back of the RV his parents rented for the trip home from Galveston. They spent two days on the road and just reached Dallas. From there they were heading West, following the border to San Diego before going north.

“So, do you think they might want to collaborate with us?” Kathy asked, hopefully, sprawled across the couch with her legs over Peter’s lap.

“I’m not sure, Cher,” he replied candidly. “But allow me to speculate. We built a kick-ass simulation platform, which they recognized from our demo sequence. Otherwise, I doubt their product review division would have even given it a second glance. Instead, they bumped it up to the executive steering committee. That speaks volumes.”

Peter nodded, “How long until you’ll be back here?”

They heard him snort, “This tub moves slower than a gelatinous cube! I’ll be lucky to see you before Christmas.”

“I gotta contact this guy soon,” Peter grumbled.

“You’ll have to do it without me, guys,” Alan replied. “You have my vote, whatever you decide. Just make sure they spell my name right in the credits for who did all the hard work.”

Kathy grinned, and Peter snorted, “Your ass hurts!” he retorted and hung up.

“Baby, you’re in the big leagues now, and we need to make you look sophisticated,” Kathy said soothingly as he stood on a padded bench in the Tom James Apparel Co. in downtown Seattle—while a middle-aged Chinese gentleman measured his inseam with a cloth tape. “And I’m afraid The Men’s Warehouse just ain’t gonna cut it.” Her remark earned a derisive snort from the tailor as he quickly measured and jotted notes before stepping away to gather different materials.

A week later, they met with the bigwigs at Electronic Arts Games. Jeremiah joined Peter, Kathy, and Arty, flying from SeaTac to San Francisco. EA’s limo service collected and shuttled them the remaining 25 miles to Redwood City. A junior exec welcomed them in the lobby, offering refreshments in a small indoor amphitheater while showing a brief video presentation about the company. They learned EA Games was founded in 1982, went public in September 1989 with a market cap of just under $90 million, and generated over $63 million in their first year, improving 30% annually, in large part to their exclusive license with Madden Football.

Peter felt like Rockefeller in his new suit, and Kathy sat beside him in a splendid low-cut business dress, her hair in lazy curls. She accessorized with designer glasses despite her perfect vision. The effect was mesmerizing, however as her steel-grey eyes radiated energy from her tanned face. She wore sensible heels with open toes to show off her single deviation from the contemporary—bright green toenails. Arty was resplendent in a new suit, though he tried not to fidget with his collar. Jeremiah sat still during the presentation and then turned his head toward a set of double doors five seconds before they opened for a handful of businessmen.

Introductions were made, and the guests were encouraged to stay in their comfortable seats while the hosts brought chairs forward until they were gathered informally across from each other. Peter noted their humble regard for their four guests, if only by deliberately placing themselves lower than Peter and his entourage.

It turned out that EA was indeed developing its own SIM platform. When they offered a brief demonstration on the movie screen behind them, Peter could tell that their product was on par, at best, with their own, though the graphics appeared smoother and more brilliant. What they ultimately wanted to do was not so much collaborate as purchase their intellectual property outright and incorporate it into their model platform. They also wanted PAAK Gaming to participate in future developments.

During a catered lunch, Peter and Arty discussed other Sim world ideas, including Trade Wars and a Modern Commerce engine featuring global statecraft and trade to become an industry tycoon. They prepared a demo clip of 15th-century sailing ships moving across the Atlantic, avoiding pirates while colonizing, developing, and establishing trade routes. Kathy’s musical scores provided a lively background for the presentation.

After lunch, they went to an executive boardroom for serious discussions.

Peter stood and addressed the executives. “First, I’d like to thank you for having us. On behalf of our team, including our colleague Alan Shoemaker who couldn’t make it, we’re honored and humbled to be here. Electronic Arts is a gaming powerhouse, and I see great things ahead for you.” The executives nodded, unaware of his sincerity. “This project has exhausted us,” he said, with Arty and Kathy nodding. “We spent over three weeks in my living room, working non-stop to prepare this platform for release,” he sighed. “Alan, Arty, and I wrote and spliced code while my lovely partner and soul mate,” he gestured to Kathy, “composed the demo music.” He paused, noticing a junior executive shaking his head. “What?” he asked.

The man flushed with embarrassment before standing. “My apologies, Mr. Shipley. I’m Eric Chambers, a chief programming engineer for our SIM project,” he introduced. “Did you say the ‘four’ of you developed your platform to near completion in only ‘three weeks’?”

Peter shrugged. “Give or take,” he looked distant for a moment. “We started on Thursday, March 14th, three days after my birthday,” he recalled. “We had to finish by the 5th because Kat and I went on a cruise the following week, and Alan had a personal commitment.”

Chambers shook his head and dropped back into his chair. “Jesus Christ!” he muttered. “I have a team of 15 programmers, including myself, working twelve to fourteen hours a day for six months and we are nowhere close to Beta!” He stretched his back and sat up straight. “I don’t suppose the four of you would want to work for me, would you?” he asked in fun, but Peter sensed the pressure the man was under.

Peter smiled back. “I can’t speak for my friends, but I’m tired of stringing code together for hours. I’m sure there are better—”

“Tell you what,” Kathy chirped with a mischievous glint in her eye. “I’ll swap Arty for a coffee and a bagel.” She grinned as she jabbed the introverted redhead in the arm beside her.

Arty grimaced back at her and rubbed his arm while the group chuckled at the sudden levity.

Deep in thought, Peter returned to his seat as he stared at his hands for several minutes. Everyone in the boardroom deferred to him as they saw his mind working over a problem from several angles.

“We planned to return to Seattle tonight,” he said as he adjusted his sleeves. “However, given this information, I’d like to adjourn for the day and contact my associate Alan Shoemaker for his thoughts.” He looked around at the suddenly hopeful faces. “Could we reconvene tomorrow morning to consider negotiations?”

The Vice President stood and clapped his hands. “That would be excellent! I’ll provide a list of bullet terms we’re prepared to offer. In the meantime, please allow my secretary to arrange accommodation for you and a list of our fine dining establishments—all on us.”

The group mingled for several minutes while arrangements were made, and then Peter and his party were escorted back through the Lobby to a limousine for transport to San Jose. As soon as they got underway, Kathy slapped his shoulder and began cursing like a pirate.