Electronic Arts Inc. (EA) and Trapdoor, an independent game developer, have come together to release Warp, a puzzle based sci-fi action game. Warp can be downloaded to Microsoft Corp.’s (MSFT) Xbox Live video gaming system for 800 Microsoft points. The game, priced at $9.99, will also be available on Sony Corp.’s (SNE) PlayStation 3 network and EA’s digital platform Origin starting March 13, 2012 in North America.
In the game, gamers play as Zero, an orange-colored alien who is held captive by humans and plans its escape from an underwater experimental facility. Gamers have the option of playing the game in two modes. In one of the modes, players can seek revenge on every human they encounter during the escape. In the other, players can select the stealth mode and escape without hurting anybody. Though it’s a puzzle-based game, the dynamic nature offers a unique and intriguing gameplay.
The game’s trailer had already been released and has received decent response in terms of new game tryouts from various quarters. EA’s strong fan base and the popularity of Origin should work in favor of making the game a success.
In the last-reported quarter, the company’s results were positively impacted by strong digital revenues that resulted from the 442.0% increase in full game downloads and other downloadable content from Origin.
EA has been shifting its focus to the digital format and with its diversified portfolio and strong product pipeline is expected to drive top-line growth going forward. We believe that high-quality titles, along with increasing online exposure, particularly in the social gaming genre guarantee market share gains over the long term.
Moreover, EA’s shift of business mix towards the digital format is a good strategy, given the current trends in the video gaming. Digital online games — including used games, rentals, mobile games and social games — have gained tremendous popularity in recent times.
However, the gloomy macro-economic environment, increasing competition and weak video game sales results over the last 12 months, compel us to remain cautious in the near term. Competition from Activision Blizzard Inc. (ATVI), Zynga Inc. (ZNGA) and International Game Technology (IGT) may act as the other headwind going forward.
The whole video game industry has been plagued by weak consumer spending and troubled economic conditions. However, analysts are optimistic about forthcoming quarters, expecting some big new game releases from publishers to steady the ship.
We have a Neutral recommendation on Electronic Arts over the long term (for the next 3-6 months). Currently, Electronic Arts has a Zacks #3 Rank, which implies a Hold rating in the short term.
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