Disney to EA: M-I-C (See You Real Soon?) K-E-Y (Why? Because We Could Acquire You!)
Electronic Arts is experiencing first hand what it’s like to be on an evolutionary downswing in one of its life-simulation games. Its stock dragged down to its lowest price in seven years Friday after scaling back its earnings forecast and announcing layoffs, EA (ERTS) is on a nasty downward spiral despite strong sales of videogame titles like “Spore” and “Rock Band 2.” And with a market value of about $7.2 billion–down from $19 billion a few years ago–there’s a chance the company may soon find itself cast as the prey to a larger rival’s predator in a nasty mergers-and-acquisitions turn on its Creatiolutionism game “Spore.”
Indeed, just this morning, Heard on the Street’s Martin Peers suggested EA would be a good acquisition, particularly for an entertainment company. “Any entertainment company could be interested in EA, given continued growth in videogame sales, the potential for cross-fertilization with TV and film storylines and advertisers’ interest in buying space in games,” Peers wrote. “Disney makes the most sense. EA’s biggest assets include its sports games, such as ‘Madden NFL,’ which would fit with Disney’s ESPN cable network. Disney could also save at least part of the roughly $200 million it spends annually to develop its own games.”
An interesting theory. Ironic too, since before EA was in the news for its current ill fortune, it was making headlines for its dogged pursuit of Take-Two Interactive. That said, with only $2.6 billion in cash on its books, Disney would have to borrow quite a bit to push such a deal through, which seems unlikely in the current market.