Like an NFL team stuck rebuilding, video game giant Electronic Arts (ERTS) announced another lackluster quarter. Pro forma revenue was $1.147 billion, compared with the consensus estimate of $1.13 billion. Pro forma EPS was $0.06, compared the consensus estimate of $0.07.
More importantly, ERTS is set to add 1,500 more people to the unemployment rosters. Although the company says the firings will save $100 million, this is still like a shitty NFL team releasing an expensive player: the team is still shitty.
To confuse matters more, Electronic Arts has committed to spend $300-400 million to acquire social games producer PlayFish. While the acquisition may be preferable to building an internal division, ERTS has not yet found their sea legs and here they are bringing more passengers aboard.
I have over a decade of experience investing in the video game sector. Although Electronic Arts is down, they have a lot of potential to reemerge. But there is plenty of time to wait and see …
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