RealD Shares Dropped: What You Need to Know

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of 3-D technology specialist RealD (NYS: RLD) were looking awfully flat to investors today as the shares dropped as much as 27% in intraday trading on some bad news out of Sony (NYS: SNE) .

So what: It was reported today that starting May 1, Sony will no longer shoulder the cost of the 3-D glasses that allow moviegoers to see movies in all of their tri-dimensional glory. Revisiting Economics 101 would remind us that if we hold everything else constant, raising the price on a product or service will decrease the demand for it. If consumers are suddenly met with one more extra cost on top of the already higher price to see a 3-D movie, they may decide that, "You know what? I really dig two dimensions after all." For obvious reasons, that's no bueno for RealD.

Now what: The plunge today follows a jump yesterday as rumors swirled that the company could end up a takeover target. A lower price could make it even more attractive to a potential buyer, but the move from Sony could also make acquirers think twice. Meanwhile, my fellow Fool Rick Munarriz thinks that "this isn't going to end well" and that the move by Sony will, in fact, put a damper on 3-D movie ticket sales.

But, is this enough reason for RealD investors to rush to cut and run? I'm not so sure. It's not a stock that I would invest in, but 3-D is still very early in its lifecycle -- at least in terms of wide adoption. For the true believers in a 3-D future, this could prove to be just a small bump on a long road.

Want to keep up to date on RealD?Add it to your watchlist.

At the time this article was published Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.Fool contributor Matt Koppenheffer does not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.

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