Electronic Arts Inc. (EA) CEO Steps Down, What’s Next?

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EA has made some pretty good progress in growing its mobile segment, investing over a billion dollars in this fast growing market. According to analysts, mobile revenue was a rare bright spot in the company’s recent reports. Another possible boost for sales could be the introduction of new consoles such as Sony’s new PlayStation, which is scheduled for release before the end of the year. However, the crucial issue will be how well EA adapts to the shifting technological environment.

Valuations and Metrics

According to Yahoo!, Electronic Arts Inc. (NASDAQ:EA) is trading at a TTM P/E of 34.2x, far above Activision Blizzard’s quite reasonable 14.23x. Looking at price to sales, EA is substantially cheaper, with 1.42 versus Activision’s 3.3. EA’s forward P/E is a little better at 16.41, but still well over the industry average. The company’s operating margin is a fairly tight 4% and the return on equity is about 8.3%. On the other hand, the company’s balance sheet is fairly strong with about $1.5 billion in cash and just over $550 million in debt.

Bottom Line

The resignation of Electronic Arts’ CEO highlights the difficulties currently facing the traditional gaming industry. With declining sales, it is a struggle for these companies to make the transition to a new way of creating and distributing content. However, Electronic Arts Inc. (NASDAQ:EA) appears committed to pumping money into this segment, and may get a boost from new consoles scheduled to be released soon. It remains to be seen how EA’s management will cope with this situation under new leadership.

The article Electronic Arts CEO Steps Down, What’s Next? originally appeared on Fool.com and is written by Daniel James.

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