Rumor: Electronic Arts Could Go Up For Sale
In a bit of head turning news it would appear that Electronic Arts (EA), a video game developer and publishing giant behind such franchises as "Madden NFL", "Battlefield" and more, is looking to sell. With everything still hush-hush while discussions are only in the beginning stages, equity giants KKR and Providence Equity Partners have already approached EA about a potential transaction. It should be noted that Providence Equity Partners already own ZeniMax Media the parent company of Bethesda, creators of the ever popular Elder Scrolls series. As such this move would make sense for them as they already have some stake in the gaming industry.
A source talking to the New York Post has said “They’ve made it known they’d do a deal at $20 a share,” considering EA's share price is just $13.70 as of this writing. It's no surprise that the gaming giant would consider a sale as they have lost nearly 37% of their market cap just this year. It also comes on the heels of Activision Blizzard's explored sale earlier in the year when parent company Vivendi tried to sell its 61% stake.
While it seems a bit unlikely the largest company in the gaming industry would sell, it's still possible but one has to wonder who would really want to take a gamble this large. Time will tell of course, but considering EA has been struggling with the challenges it's had to face such as the change to digital distribution, falling sales of $60 games, drops in console sales, and the increase in free to play and mobile games grabbing consumer attention. It doesn't help that consoles, games and accessories sales have fallen 20% in July alone, which just adds to the long stretch of declining sales since last November. Simply put it seems like a hard road ahead for EA, even if they sell it's not going to be easy restoring the industry giant to it's former glory.
Along with the industry, EA was hit hard by the recession in 2008, and failed to anticipate the strength of social networks and tablets in transforming the gaming market. The Redwood City, Calif., company is now the No. 2 player behind Zynga in social games that users play through Facebook and similar sites, according to Wedbush data. The company’s digital revenue — driven in large part from “SimCity Social,” a Facebook game — grew to $324 million in the first quarter from $209 million in the same period a year ago. Yesterday, EA said it would give away “Command and Conquer” free of charge to help in the digital transition.
Posted by | Thu, Aug 16, 2012 - 01:04 PM