pretty bad report on E/A - High-Def Digest Forums
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Old 05-27-2009, 08:58 PM
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Default pretty bad report on E/A

http://www.gamesindustry.biz/article...-cycle-analyst

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David Jenkins 11:42 (BST)
26/05/2009
"Electronic Arts has missed the current hardware cycle" - analyst

EA has "missed the current hardware cycle" and is unlikely to return to historical operating income margin levels "anytime soon", according to a new report by analysts at Cowen Research.

In an occasionally damning critique of EA's plans and guidance the report states that: "We believe that following serial earnings disappointments, Electronic Arts now deserves a lower valuation premium than the company has historically enjoyed."

"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."

The report suggests that EA's guidance for the next financial year is "fairly aggressive" but that its targets could still be met. EA's revenue targets currently stand at USD 4.3 billion, but the report suggests this can only be achieved via further cost cutting - which is likely to be damaging in the long term.

The report points out that publishing revenue growth will need to outperform overall industry figures by a considerable margin, despite a "pared back" release schedule and currently difficult global economic conditions.

Growth in digital distribution is seen as a key factor, with EA aiming for a 100 per cent increase over the course of the year - which the report again characterises as achievable but with considerable downside risk.

Despite considerable scepticism over EA's business model and guidance the report is not entirely critical, maintaining a share rating advice level of "neutral".

Indeed, the report suggests that EA's own expectations for its first quarter may be unnecessary low, with a strong line-up including EA Sports Active and Bloom Blox: Bash Party on the Wii. First year sales in the US are estimated at 1.4 million and 350,000, respectively.

Although this would make EA Sports Active one of the most successful third party titles on the Wii, the report is general sceptical about the ability of any third party publisher to thrive on the format.

The report is particularly despondent about third party sales when revenues for Guitar Hero and Rock Band are ignored, where the top 5 per cent of third party titles for the Wii sold an average of 860,000 units, compared to 2.5 million on the Xbox 360 and 1.2 million on the PlayStation 3.

These top 5 per cent of titles accounted for only 31.8 per cent of total market share on the Wii, compared to 41.2 per cent on the 360 and 34.2 per cent on the PS3. The figures also suggest that quality and critical reaction are far less import on the Wii, making successful titles even harder to predict.

The report is also sceptical over the impact EA's increase in unlicensed new intellectual properties will have, with only 36.5 per cent of sales expected to come from unlicensed titles in the next financial year. Estimated first year US sales for selected EA-owned titles stand at 1.5 million for The Sims 3, 0.4 million for Brutal Legend, 0.63 million for The Saboteur, 1.3 million for Army of Two: The 40th Day, 2.1 million for Dragon Age: Origins, 1.1 million for Battlefield: Bad Company 2, 1.1 million for Mass Effect 2 and 0.8 million for Dante's Inferno.

In a final comment on the company's future for the next 12 months, a potential buyout is mentioned - especially given EA's current share price is currently significantly below its historical valuation. The report hints that Disney and Time Warner may be the most likely suitors - although the latter suggestion seems to have been made before the recent move for Midway.

Although Cowen Research's expectations for 2010 are only a little below that of EA's it is significantly lowering its 2011 estimates, from a year-on-year earnings per share increase of 48.7 per cent to just 24.0 per cent. The firm's analysts suggest that "further margin gains will be difficult without significant new hit games". However, little is currently known about EA's publishing schedule for that period.
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Old 05-28-2009, 12:13 AM
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The bigger they are...

Seriously, I think this hits them harder than the smaller publishers because they have so much pressure from the shareholders. Which in turn creates a feedback loop of bad press. Hopefully EA Sports Interactive will break out and make them some cash. The commercials I've been seeing are really nice.

P.S. Everyone go buy Brutal Legend and Dragon Age when they come out.
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Old 05-28-2009, 08:39 AM
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I really hate EA anyway. Fuck them.
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Old 05-28-2009, 08:48 AM
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i don't get all the ea hate, besides them being a big company and people generally think big companies are the bad guys
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Old 05-28-2009, 09:02 AM
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Quote:
Originally Posted by nmcmahan52 View Post
i don't get all the ea hate, besides them being a big company and people generally think big companies are the bad guys
I didn't like them for awhile because I just thought they put out mostly horrible games, but over the last couple of years they've turned around nicely. Riticello (or however you spell it) has been good for them I think.
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Old 05-28-2009, 09:47 AM
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Quote:
Originally Posted by nmcmahan52 View Post
i don't get all the ea hate, besides them being a big company and people generally think big companies are the bad guys
I hate them because my son can't play any of their games online.

Here's an example: I bought two copies of Burnout Paradise so we could drive around together. EA's policies won't let him get online with me to play... no matter what.

Lesson learned.

I hate Microsoft for not letting me change my son's Xbox Live account to a normal, adult account so that he can play EA games online. I have called them multiple times and asked them to change his account to a normal account so he can play games... they said that it will change on his 18th birthday.

Wonderful.
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Old 05-28-2009, 09:50 AM
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so is that a microsoft issue or an ea issue?
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Old 05-28-2009, 10:48 AM
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EA boggles my mind.

With NFS Undercover, they charge money for content already in the game (instant access to stuff you can unlock) but they just gave out a big expansion with like 16 new races and game modes for free. Weird way of doing business.
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Old 05-28-2009, 10:57 AM
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I've come to like EA.

They secured Pandemic and Bioware and even gave a spirited defense for Mass Effect.

Dead Space was brilliant. Mirror's Edge was a fantastic idea. I think ME was very frustrating at times but I'm sure a sequel would fix the niggles I had with it. They showed guts to deliver some new IPs.

I very much look forward to their upcomming games!
Brutal Legend
The Saboteur
Army of Two: The 40th Day (saw a preview in a GI, it's looking a lot better then the original)
Dragon Age: Origins
Battlefield: Bad Company 2
Mass Effect 2
Dante's Inferno
Rock Band Beatles
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Old 05-28-2009, 10:58 AM
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Quote:
Originally Posted by nmcmahan52 View Post
so is that a microsoft issue or an ea issue?
It is definitely EA. He can play games from EVERY other publisher, including Microsoft.

Still, I hate Microsoft for not letting me change the account.
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