Microsoft in talks to buy Electronic Arts!?

[Ike Turner]

WtH! ?
Just saw this :
http://www.mobiletechworld.com/2009/09/23/rumor-microsoft-in-talks-to-buy-ea/

Shares of Electronic Arts Inc (ERTS.O) jumped more than 4 percent to $19.36 on Wednesday on unsubstantiated talk that Microsoft Corp (MSFT.O) might be interested in buying the video game publisher, traders said.
“There’s talk that Microsoft might be interested in acquiring Electronic Arts. It’s unsubstantiated chatter, but it’s out there,” said Frederic Ruffy, options strategist at WhatsTrading.com in New York.

A London-based trader also cited similar talk as making rounds in Europe. Microsoft shares were up 0.9 percent at $26 on Nasdaq

Update:

But Trip Chowdhry, an analyst at Global Equities Research, said Electronic Arts was not on Microsoft’s “radar screen” based on his industry contacts.

“Our contacts just don’t see Microsoft buying Electronic Arts, no synergies whatsoever, and also not Microsoft’s corporate primary focus right now,” Chowdhry wrote in an e-mailed note.

 

[Silent_Buddha]

That doesn't make much sense considering they let some internal dev teams go and disbanded a few others.

I'm not putting much credence into this...

Regards,
SB

 

[patsu]

It may mean MS needs someone like EA to execute their internal dev teams strategy.

 

[obonicus]

And yesterday I saw news that EA might be interested in owning THQ.

Was there any effect on MSFT stock after this bit of news, considering EA's ability as of late to hemorrhage cash? Google Finance hasn't even attached this story to the stock (yet).

 

[Cheezdoodles]

Meh, short EA stock. This rumour seems super unlikely

 

[Xenus]

I don't see it as even possible. If I remember right EA still has exclusive rights to the NFL which probably means any attempts to buy EA will be met with anti-monopoly lawsuits.

 

[gongo]

Peter Moore used to be a big Xbox fanboy! Gives a darn good presentation though...if this goes through, gaming as we know will change...forever..MS will be dominating what you play on Consoles and PC. This could be the time for Apple to enter the war...or Sony and Nintendo finally burying the hatchet...because a M-SEAbox is too powerful...level 99 powerful...to be left on its own...

 

[liolio]

Peter Moore used to be a big Xbox fanboy! Gives a darn good presentation though...if this goes through, gaming as we know will change...forever..MS will be dominating what you play on Consoles and PC. This could be the time for Apple to enter the war...or Sony and Nintendo finally burying the hatchet...because a M-SEAbox is too powerful...level 99 powerful...to be left on its own...

It depends it's not because MS buys EA that there willing to lose the money EA makes on other supports but who knows with MS...

 

[Shifty Geezer]

1) How much would this cost MS?
2) What would the likely revenue of MS onlyu platforms be, considering EA would lose the majority of its market (assuming an MS owned EA doesn't support the other platforms, although they could release software with an XB advatnage to encourage their machine while not cutting off all income)?

Seems like a lot of expense to buy into an annual loss to me. To turn such a purchase around and turn it into profits and platform domination would be a herculean task, and set up another massive multi-billion dollar 'investment' on MS's part. Wouldn't it be cheaper to sell XB360's at $100 each?

 

[Silent_Buddha]

Aye, unless MS is getting EA at an incredible bargain hugely under market value, I just don't see where this would make any sense.

And even then, I don't see it making much sense.

Regards,
SB

 

[mrcorbo]

Rumors like this continue to come up and continue to make no sense from a business standpoint.

1. MS, as a platform holder, wouldn't want to operate a business that provides content to a competitor. So, you effectively spend a bunch of money to acquire an asset and then immediately devalue it tremendously by limiting the market for it's products and making large portions of its management and labor force redundant. Divesting themselves of these now unwanted pieces and restructuring the acquired publishing and development assets around the 1st-party business model ads even more cost.

2. This is about as much of an about face for both MGS and MS in general as far as strategy goes as you can get. MS focuses on producing as few products as possible in each market preferring to provide the foundation for others to build on and taking their MS tax on each product. They have never seemed to keen on becoming a big-time content producer, which is what a purchase like this would turn them into.

 

[AmFreak]

EA has a market cap of ~ 6.5 billion $, before the rumor it was ~ 6 billion $. I don't think its worth it for MS to buy them. But it would be a huge blow for Sony if all the franchises would be exclusive to MS. EA is by far the biggest publisher (if you dont count in Online Games) and they have a ton of important studios / franchises (Madden, NHL, NBA, FIFA Soccer, FN, Burnout, Battlefield, The Sims, Mass Effect, ...). If you want to buy them buy them now because theri share price is low as hell and is 1/3 of what it was 2 years ago.
http://www.google.com/finance?q=ERTS

 

[draconian]

Does make sense at some small level

EA gets about half their next-gen revenue from the ps3. So, to keep EA from being a money hog(and not develop for the ps3), MS would need to layoff way more people to keep EA sustainable.

I don't think that makes much sense. They would most likely have to keep developing for the ps3 but maybe give EA 360 games exclusive content.

The only thing EA has that is really exclusive is the NFL license and EA had to pay like $300 million for that license which ends around 2011-13.

I think it would be more profitable/smarter for MS to either lower the prices on the xbox or simply compete with EA and get that NFL exclusive license.

 

[Acert93]

It would put MS in the driver seat of a unified "next gen" platform ... play with us everyone wins, don't play with us, you all lose and we eventually win.

MS could also use EA to hit other platforms (business as usual) but leverage them for exclusives and, more important, "casual" gaming. Big Natal push, long legs to the 360, a full court press on next-gen launch titles (could effectively kill at least one competitor out of the gate), would have a decent stake in Ubisoft, etc.

Very, very expensive buy. Could be a game changer in terms of content though and how these companies run. If MS is focused on controlling content and having a bigger stake in the industry outside a couple IPs and a hardware platform and wants a bigger piece of the publishing pie this would be the "big buy." Would also create an interesting tension with Activision-Blizzard. My concern is the industry is fickle and dev houses are all about the talent they have. Pubs like EA seem to drain the talent and discard so the question is what value is EA? How much does MS really want the EA IPs and publishing connections?

 

[-tkf-]

Why stop there? Activision, Rockstar.

Don´t beat the competition, buy it.

 

[specwarGP2]

activision would seem like a better buy than EA

 

[Laa-Yosh]

Seeing the title, I was like

 

[Scott_Arm]

Where did this rumor start? Seems like stock manipulation to me, more than anything.

 

[MfA]

options strategist

I'd have to agree with Scott.

 

[Shifty Geezer]

Very, very expensive buy. Could be a game changer...

Could be a game changer? I think it'd completely terraform the playfield!

...in terms of content though and how these companies run. If MS is focused on controlling content and having a bigger stake in the industry outside a couple IPs and a hardware platform and wants a bigger piece of the publishing pie this would be the "big buy."

Although it'd be a complete about-face on their recent moves to let in-house development go. Why lay off a load of MS dev-houses only to buy a job-lot up again?

From a Euro perspective, FIFA would be a big coop for MS. AmFreak's list of big franchises doesn't look so great outside of the sports IMO. SIMS is near-enough an MS exclusive as it's principally a PC game, although loss of handheld options would hurt the franchise going forwards IMO. I suppose the Zune platform would want a lot of support if it's to take off, and something like SIMS Zune may help. But what's in it for EA? They'd do a lot better releasing these titles for iPhone, DS, and other devices.

I'm having trouble seeing a solid case in favour of the move. The cots just don't stack up, unless MS want to become the only sports console in the world?