Kahunaburger said:
If I owned stock in them, I'd sell it.
In November 2011 I didn't own any stock in Electronic Arts but began selling the stock short. Recently (over the past two weeks) began the process of deleveraging... to avoid getting caught in an aggressive options position... although probably just a little "too" soon, as it is now trading for just under 15.50 US a share. Maybe it's time to go long?
As far as companies go... on paper they are really pretty decent but they are consistently under performing. Cash solvent, good I.P., no debt... so on and so forth.
Downside is that they have caught the "allergic to innovation" bug that is very common with American businesses. By this I mean that the strategy (laughingly) is to create an atmosphere in which titles may be pumped out year after year like the sports games, MMO, portable applications.
They are big enough that in some respects what they seem to want to do is eliminate competitive products or simply buy them up, reducing consumer options, then saturating a marketplace with their own I.P. Similar to a "purchase for resale". In one respect it is similar to a chemical company such as Dupont, but without the technical expertise at the top.
In the long term it is a sound idea, however, in the short term games such as SWTOR with production and advertising cost hitting 250~300 million + dollars, lack luster subscriptions, and frequent churn... coupled with problematic games such as ME 3 (which has really soured the Kool Aid) the company has demonstrated a mediocre return on dollar invested.
As such it has been more profitable to parasite or wolf pack them. Being the case, investors thinking they were buying into the next big thing, have been taken for a very painful ride all the way down to the ground.
Over the next quarter or two the difficulty for them as a company is having products that are attractive to customers to spite the reputation of the company as a whole.
In Short:
The Good
Strong I.P.
Strong industry presence
Strong financials
Excellent distribution chain
The Bad
Top Heavy impotent management
Aversion to innovation
Wal-Mart attitude towards growth (questionable formula)
Out of touch with market place coupled with poor quality assurance
The Ugly
P.R. is in the toilet (near shattered consumer confidence)
Creative accounting is better than creative products?
Products trending towards a lack of synergy.
As an investor there are several items that would have to be addressed before one could really take the company seriously as a vehicle for portfolio investment in the short term. Although in the long term, they are probably "ok" for keeping up with inflation and other factors.