Electronic Arts Went Into Debt To Buy PopCap

[Thyunda]

I've got to be honest: I honestly think EA, for a while now, have been abandoning common sense

Rumors around town is that EA is trying to buy Funcom right now but they won't sell. EA has a co-publishing deal for The Secret World (and they've obviously made that partnership on basis of the quality of the game)

Which is why I guess they want to keep their hard money on the ready, in case they manage to get in with Funcom, which if my source is right, is their main target. Apparently they're eager to buy them up before their market value rises tenfold.

I personally don't think Funcom will take any offer. I could be wrong of course.

Why would anyone want to buy Funcom...? They make terrible games and their community support is actually laughable. I didn't come to this headline to say this, but EA trying to buy Funcom intrigues me.

I'm not trying to troll anyone who is a Funcom fan...I suppose my experience is limited to Anarchy Online, so I'm just hateful.

But really - Why buy Funcom?

 

[Herbsk]

Why is this action so mistifying to everyone? Large corporations often like to carry a large debt load in order to balance their books.

I dont' remember all the specifics from my investments classes, but I know this is a viable strategy for a large corporation like EA.

 

[D_West]

They REALLY need money for The Old Republic, I guess

 

[Sabinfrost]

Worth noting EA would not have spent that kind of money without the promise of making much more, I wonder how hard they are going to flog their new horse...

 

[Rossmallo]

*Spoony voice*

NO!!!! NOOOOOO! NOT THIS WAY!

Seriously, NO! Why the HELL is this allowed!? EA buying these guys out is sacrilage enough, but to go into FINANCIAL TROUBLE to do it, risking Popcap along with EA!?

Three words:

FUCK. THAT. NOISE.

 

[Baresark]

It's not a good call to purchase with credit what you have the cash for. In economic terms, debt is a negative commodity and will always negatively affect your bottom line. The more I think about it, I would say they are not as liquid as they claim to be.

If you dont know jack shit about economics then dont talk. With how low interest rates are these days it is getting far more common for it to be cheaper to finance a purchase then actually pay for it outright in cash.


Also if a company buys another out and they dont layoff some people then they are doing it wrong. There are tons of positions that you dont need once the companies merge.

First off, I do know jack shit about economics. Let me frame this out for you. At no point is paying more for something, paying less for it. You are arguing that it's cheaper to take a loan, which is 100% false. You pay more for it in the long run, and if the loan was carried for 30 years, as most home loans are, even with ultra low interest rates, you are paying almost double for it after that 30 years. They have clearly stated they carrying it for 5 years, so i would bet that since the price jump is so dramatic in such a short time, they are not getting that good of an interest rate.

Also, EA is a publisher, and PopCap is a developer. They wouldn't lay anyone off because their roles are completely different from one another. And it's not like PopCap needs EA, but the owners of PopCap clearly couldn't walk away from the $550 Million they were offered, and I don't blame them at all for that. But, they shouldn't be laying anyone off because EA does not develop games at all. And changing the makeup of a wildly successful dev house such as PopCap, would be a complete mistake.

 

[Baresark]

Wouldn't this be more appropriate if it was titled "Electronic Arts borrows tons of money to buy Popcap"? I mean, it says plainly in the article that they had more than enough money to actually buy them, just opted to take out a confusing loan. Saying they "went into debt" suggests they went into the red to do it.

Though, I guess that would be a lot less sensationalist. If that's what you were going for, mission accomplished.

They did actually go into debt to do this though. Debt simply means they owe someone money, which will work against their bottom line ultimately. I'm just saying.