Videogame developer and publisher, Electronic Arts Inc. (ERTS), popularly known as EA, recently launched its successful franchise The Sims on Facebook. The Facebook version of the game is called The Sims Social.
EA has been taking several initiatives to gain traction in the popular segment of social gaming through various games such as Monopoly Millionaires, FIFA Superstars and Scrabble. The Sims Social is the latest offering from EA in this space.
The Sims franchise was released in 2000, and ever since, the company has sold more than 140 million copies of the games and its sequels in 22 languages across 60 countries around the world. The game has generated approximately $3 billion in revenues for EA.
The Sims Social enables gamers to step into the shoes of virtual characters as they navigate through big milestones in life — fostering a career, moving into a home, meeting someone special, marriage and having children. Apart from leading a virtual family life, the gamers playing on Facebook will be able to interact with fellow gamers, thus making the game even more interactive and appealing.
EA is targeting a large percentage of revenues from the digital platforms based on its broad array of titles. In the social gaming circuit, which is being dominated by Zynga, EA has made the right moves to gain traction in the segment.
Recommendation
We believe Electronic Arts has a strong product pipeline for fiscal 2012 and beyond, which will drive its top-line growth going forward. We believe that the high quality titles, impressive product line, increasing online exposure, social games and portfolio diversification guarantees market share gains over the long term.
With gaming titles getting going the digitized route, EA has launched Origin, its first online service, through which the company plans to sell its downloadable titles directly to customers. We believe that EA is better equipped than many new players to gain traction in the digital format with its variety of titles and massive fan following.
Additionally, the strategic acquisitions made by the company in the field of social and casual gaming platforms will reap benefits in the long run.
However, cut throat competition from Activision Blizzard Inc. (ATVI) and Take-Two Interactive Software Inc. (TTWO) may act as headwinds going forward.
We have a Neutral recommendation on Electronic Arts over the long term (for the next 6 to 12 months). Currently, Electronic Arts has a Zacks #2 Rank, which implies a Buy rating in the short term.
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