Tuesday, November 4, 2008

DDE October Update

Hello to all and happy autumn :-) And thanks to Eliale for catalyzing this post.

Since the Linden Labs post about their increased tiers for Openspaces in January, I have been running flat out trying to get organized and make sure that DDE can survive this latest change. With 34 Openspace sims as of the time of the announcement, DDE could be pretty hard hit by this announcement. It is a busy time, and there are a number of updates I want to provide. Forgive my brevity - but all of my attention has to be focused on guiding DDE through the difficult waters it finds itself navigating.

October Results for DDE
October was a difficult month. I was laid up sick for almost two weeks without being able to get online, and several large renters left during that time. I guess the world financial situation is starting to have an impact, because most of them left reluctantly, but due to RL financial issues. As a result, some land lay empty for quite a while, making no revenue. So, sad to say that October marks the first time in its history that DDE had a loss. With revenues of just under 2,000,000L and expenses of 2,300,000L, DDE carries a 300,000L loss forward into November. However, DDE was able to cover costs because I had been holding a reserve for just such an eventuality, and we remain solvent and in decent shape.

Effects of the Openspace tier increase
Although the tier increase for Openspace sims has a significant impact on DDE operations, I have informed all renters of Openspace sims that they have three options:
1. Pay an increased tier in January and keep their sim
2. Move to 1/4 regular sim, with the same prims, at the same rent that they pay now
3. Leave
So far, I have talked to almost all of the renters in question, and although one or two have signaled an intent to leave, almost all of them are choosing one of options 1 or 2, in about a 50/50 split. Within the next two weeks, I will have a clear sense of what they have all decided, and will move forward.

The future of DDE
With the lacklustre months in August and September, and a clear loss in October, to be frank, DDE was hovering on the verge of bankruptcy. In order to survive, I have had to make some difficult decisions, and act quickly. To begin with, it was clear that I needed to reduce my tier level exposure - at the end of October, I was paying LL almost $8,000 USD per month in tier, leaving me personally exposed if the business continued to decline. In addition, it was clear that with the amount of empty land DDE currently carried, that tier level was not going to be reached in October and November.
Therefore, I have taken the following steps.
1. I have now sold 11 Openspace sims, receiving a modest price and covering the cost of transfer with a little left over.
2. I have abandoned one Openspace sim, which had a tier date coming in a couple of days, and no prospective buyers.
3. I have sold two regular sims in order to generate some cash. Considering the poor land market right now, I was able to get a decent price of $1,200 combined for the two of them, net of transfer fees. This provided some cash to pay tier on the remaining islands, and lowered tier overall.

With these moves, and more anticipated in the next two weeks, DDE has lowered its tier level from $8,000 to about $6,500 per month. Further reduction in the size of DDE will be forthcoming. I want DDE to emerge on the far side of this difficult time significantly smaller, but significantly stronger as well. Although I think the days of 800,000L profits per month are gone for good, I am confident that I can move DDE into a profitable position by the end of November, with a decent profit margin on a smaller land base.

As with any significant change, there are new opportunities emerging as well, for those with the courage to seize them. I will be keeping a close eye on mainland prices and movement, because there may be opportunities in that market, as some Openspace renters across the grid move onto mainland once again. I will proceed with caution, of course. I will be keeping an eye on estate markets as well, because the final decision of Linden Labs regarding Openspace sims has not yet been made, and any changes in their announced policy may provide further opportunities.

Relisting of DDE
It is still my intention to relist DDE on the ISE. I had intended to relist in mid-October, but then fell ill. And given the current uncertainty and large scale change that DDE is going through, I thought it prudent to wait until the effects of these changes are more clear, so that I can post financial statements that reflect the new reality of DDE, rather than the old reality. I think this is the only responsible way to give potential investors an honest and clear picture of the company. However, within a couple of weeks, this new reality should be much clearer - so watch for DDE to make a formal application to ISE for listing in November.

To all my shareholders - I want to thank you for your patience and continued confidence. I know that the last few months have been difficult, but I will continue to work hard for your interests and to ensure that DDE remains a solid and ethical business. Please feel free to continue to contact me with questions, comments, or concerns.