EA Has "Missed the Current Hardware Cycle"

[Andy Chalk]

EA Has "Missed the Current Hardware Cycle"

A report by research firm Electronic Arts [http://www.cowenresearch.com/] has "missed the current hardware cycle" and questions the company's financial guidance following "serial earnings disappointments."

The report says EA's revenue growth will have to exceed that of the industry as a whole by a "considerable margin" despite a reduced publishing schedule in order to achieve its targets and while further cost reductions could help make it happen, such cuts would also likely cause more harm than good in the long term. Analysts' figures for 2010 aren't much lower than EA's own but drop off sharply in 2011; the company needs "significant new hit games" to drive margin gains but very little is currently known about the company's release schedule for the year.

"We believe that following serial earnings disappointments, Electronic Arts now deserves a lower valuation premium than the company has historically enjoyed," the report says. "Since management first laid out its initial full year 2010 guidance and full year 2011 long-term guidance in February 2008, the company has failed to deliver on its earnings targets and has been forced to repeatedly revise down its guidance. Given this historical record, we do not think investors should place too much faith in management's current guidance."

Analysts also suggested that the current low price of EA shares could make it an appealing takeover target for companies like Time Warner [http://disney.go.com/index].

Source: GamesIndustry [http://www.gamesindustry.biz/articles/electronic-arts-has-missed-the-current-hardware-cycle-analyst]


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[thiosk]

I would crack up if disney bought EA.

Hell, maybe ill buy some shares and hope for a buyout.

 

[oliveira8]

WHat? Relesing the same games every year is no longer profitable? Wow...

 

[fix-the-spade]

If Disney bought EA, wouldn't that throw several spanners into the works for Kingdom Hearts?

Nah, I think it would be ok.

I thought Kingdom Hearts was a Disney/Squenix thing, Disney absorbing EA probably wouldn't kill it as Disney already has a couple of game studios but worked with Squenix anyway. I think they'd just be after the franchise names and development staff.

 

[jimduckie]

that's what happens when you get too big ,change is hard and will be the end if they keep it up

 

[m_jim]

I applaud EA for making new IP's like Mirror's Edge and Dead Space, but both of those titles were just "okay." They need to step up their game before gamers realize that we don't need them.

 

[DeadlyYellow]

It's hard trying to balance out the reputation with the public, and thusly their consumers. While there are those who support the company for their games there are also a fair share who damn it altogether for its ham-handed approach to DRM, not to mention pirates that do so for the sake of pirating.

 

[Thanatos34]

Good. They deserve this with their ridiculous attempts to punish pirates by punishing legitimate customers.

 

[Therumancer]

Meh, I think a lot of it comes down to the tendency to judge companies by "projected profit margins" even in this economy. A company can make more money than ever before ans still be considered a failure because it didn't grow as much as experts thought it should.

Really it's kind of ridiculous from where I'm sitting.

I do not think EA is in any real danger.

That said I liked Dead Space, but didn't care much for Mirror's Edge. I own the former, and will probably never obtain the latter even if it drops through the floor in price.

>>>----Therumancer--->

 

[KDR_11k]

I applaud EA for making new IP's like Mirror's Edge and Dead Space, but both of those titles were just "okay."

Regardless of what you think of those two games (imo the former is amazing, the latter is poor), there's no doubt in my mind that EA wouldn't have suffered such huge losses if they'd made more games along those lines.

From what I gather from statements about their finances those games are the reason their profits are down.

 

[Mrsoupcup]

If Disney bought EA, wouldn't that throw several spanners into the works for Kingdom Hearts?

No they would just die together and the world would be a more original place.

 

[dochmbi]

I thought Mirrors Edge sold pretty well. It is my favorite game this year, so far.

 

[cleverlymadeup]

i don't think they're in much trouble, they're a big company and sometimes rumours like this are just designed to drive stock price down so they can be ripe for a take over

 

[CoverYourHead]

I applaud EA for making new IP's like Mirror's Edge and Dead Space, but both of those titles were just "okay."

Regardless of what you think of those two games (imo the former is amazing, the latter is poor), there's no doubt in my mind that EA wouldn't have suffered such huge losses if they'd made more games along those lines.

I also loved Mirror's Edge, and I think if EA keeps working towards new ideas and IPs, along with expanding on their current ones, then they'll do great. I just really hope they keep up with their new creations and don't relapse to their old habits of remaking franchises.