Wednesday, September 23, 2009

Rumor control: MS has eyes on EA


According to numerous Web sites, Microsoft may be considering a move to buy video game maker EA.

Rumor? Fact?


Tech Rumor: Microsoft Eyeing EA
By James Rogers 09/23/09 - 12:22 PM EDT

REDWOOD CITY, Calif. (TheStreet) -- Takeover rumors are swirling around video game maker Electronic Arts(ERTS Quote), driving the company's stock up more than 5% Wednesday.
Citing information from traders, a Reuters report said there was "unsubstantiated talk" that Microsoft (MSFT Quote) is interested in buying the publisher of the Madden, Medal of Honor and FIFA series.

Shares of EA jumped 97 cents, or 5.24%, to $19.49 on the news, outpacing the Nasdaq, which grew 0.19%.

Although merely a rumor, an acquisition would boost Microsoft's presence in the video game space. The sector, however, has struggled to live up to its recession-proof billing, although this could mean an attractive valuation for M&A targets.

U.S. video game sales fell in August for the sixth straight month, according to figures from NPD Group, and analysts highlighted disappointing sales for the latest game in the Madden series.

EA, which was recently downgraded by Goldman, nonetheless has a potent weapon in its armory. The Redwood City, Calif.-based firm, which competes with Activision Blizzard(ATVI Quote) and Take Two Interactive(TTWO Quote), recently launched The Beatles: Rock Band game, which is expected to be a top seller this holiday season.

Shares of Microsoft rose 20 cents, or 0.78%, to $25.97 Wednesday.

Neither EA nor Microsoft has yet responded to TheStreet's request for comment on this story.

-- Written by James Rogers in New York.


M4dski11z's take: This could happen. Read my response again - this COULD happen. With the slow decline of the Madden franchise and the downgrade of their stock to neutral, EA is looking for a way out - fast. MS is looking for a way to dominate in video games as it dominates in the software. Acquiring EA is a perfect springboard to go deeper into the video game world.

It fits MS's MO - look at the software biz. MS dominates, hands down. MS jumped into the digital music player biz - and the Zune HD is looking oh so promising. Now, with the 360 leading HD consoles, why not add video games to its stable?

MS has been looking for way to dominate Sony for years. They have a fresh memory of Sony kicking them in the teeth with the PS2. And MS has a very, very long memory. Buying EA will put Sony in dire straits. The multiplatform flow of games to the PS3 and 360 will stop. The 360 would become the console with the deepest bench of games - think about it - Madden, Battlefield, Rock Band, NBA Live, Tiger Woods, Medal of Honor, Need for Speed - on one HD console. MS would likely keep EA's PC publishing going, and would probably increase Wii games too. But Sony? Wow.

Will this happen? Who knows? Maybe EA is doing this *chatter* to raise more funds to acquire THQ. However, I do see this potential takeover and can see MS dominance written all over it.

1 comment:

Michael L said...

I think if this were to happen, you would see the PS3 folding (no pun intended). I agree that if Microsoft were to acquire EA, not only would that make Microsoft the largest software empire (aside from their OS, Dynamics products, and proprietary software) but also the possible destruction of Sony's stock.

Think about it, if Microsoft had EA.. Sony would lose 70% of their current game lineups. With that kind of hit, you would see less games for the PS3 which would make the Xbox 360 the dominate console (aside form the Wii, which probably shouldn't count).

Then again, if this were to all be true, someone would most likely call in the Monopoly Police and Microsoft would be in court again.