Electronic Arts Inc. (EA): This Gaming Company Is in Deep Trouble

Page 1 of 2

Electronic Arts Inc. (NASDAQ:EA) has been named the “Worst Company in America” for the second year in a row by Consumerist, a popular consumer affairs blog. Electronic Arts Inc. (NASDAQ:EA) is a leading player in digital interactive entertainment. It develops gaming software content for video games, computers, mobile phones, etc. Its leading brand, EA Sports, offers various sports-based video games like FIFA, Cricket, etc.

Electronic Arts Inc. (NASDAQ:EA) is really struggling. The stock is almost 26% down from the high level of $24 it achieved in November 2011. The latest games coming from EA’s stable have failed to attract customers. Many customers have complained of the problem of servers going down while playing the games.

Recently, the CEO of Electronic Arts Inc. (NASDAQ:EA), John Riccitiello, stepped down. The company has laid off an undisclosed number of employees from its Montreal-based mobile studio. Clearly, not everything is right with Electronic Arts.

Issues with EA

In recent times, Electronic Arts Inc. (NASDAQ:EA) has failed to provide games and products which are well received by consumers. Games like Dragon Age 2 and Mass Effect 3 have been rejected and criticized by game lovers, the exception being Dead Space 3, which was the number one game in February 2013.

The most disturbing has been the SimCity Debacle. The release of SimCity 5 met with angry reactions of gamers as it required them to be always online. The requirement of being online always resulted in heavy traffic and the jamming of servers. Some customers even claimed that the online requirement is a trick of Electronic Arts to encourage in-game store sales.

Electronic Arts has been accused of not supporting its products properly, as seen in the debacle of SimCity. Many games are facing the issue of bad support.

Moreover, the gaming industry, as a whole, is facing trouble. There has been a collapse in the revenues of the video game industry. The sales of gaming consoles are low. According to an NPD report, in the month of February 2013, the sales of physical video games, hardware, and accessories in the U.S. fell 25% to $810 million. Hardware sales dropped 36% and software sales dropped 27%. The rise of digital games has affected the sales of physical games.

Larry Probst has been appointed as executive chairman as the company searches for a new CEO. He has been a board member and former CEO of the company. Riccitiello has held himself accountable for the shortcomings in the 2012 financial results of EA.

Financials

Net revenue for the quarter ending December 2012 was $922 million, down 13% from the year ago period . The revenue for the quarter was majorly driven by FIFA 2013, Madden 2013, and Medal of Honor: Warfighter. Electronic Arts posted a net loss of $45 million in the quarter. The diluted loss per share for the quarter ending Dec. 31, 2012 was $0.15.

Source: EA Quarterly Report Dec 2012

Stock analysis

EA’s stock is currently, trading at a low level of $17. The stock is almost 26% down from the high level of $24, it achieved in November 2011. The dismal performance of the stock can be seen in the chart below.

Source: CNBC

There has been considerable decrease in the market valuation of EA, which has reduced more than 40% since January 2012.

The competitors of EA include , , Nintendo, Ubisoft Entertainment, etc. Electronic Arts is smaller as compared to Activision Blizzard, Inc. (NASDAQ:ATVI), which leads the industry with a market capitalization of $16.1 billion. The five year EPS growth forecast for EA is (0.02)%.

The operating margin of EA also lags behind competitors. A positive thing is its lower PEG ratio. Electronic Arts’ 5 year expected PEG ratio of 1.37 is better than that of Activision Blizzard’s 2.13.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Top Reasons For Getting Fired

The 3 Best States to Start an LLC

10 Jobs That Allow You to Travel

7 High-Paying Jobs You Can Do From Home

12 Best Cities to Shop in USA

10 Best States To Practice Medicine

The 10 Best States to Have a Business

The 12 Most Expensive Apple (AAPL) Apps in the Market

The 10 Richest Billionaires in the World

10 Biggest Kickstarter Failures

The 10 Best Places to Work At

The Top 10 of Google Inc (GOOGL)’s Most Expensive Acquisitions

13 Best Cities to Visit in South America

10 Most Expensive Works of Art of All Time

The 10 Richest Banks in the World

The 10 Best-Paying Jobs in America (2014)

7 Most Expensive Foods in the World

The World’s Top 10 Earning Authors

Five Wicked and Very Expensive Items (and Other “Stuff”) Sold on eBay

10 Biggest Celebrity Bankruptcies

The Top 10 Highest Paid CEOs in 2014

The 10 Most Expensive Real Estate Cities in America

10 Most Expensive States To Live In America

The 10 Best Airlines in the World

The 10 Best-Selling Cars in 2014

The 10 Best Industries to Invest In

The 10 Most Expensive States to Own a Car In

Top 10 Business Schools in US: 2014 Rankings

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!