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Electronic Arts Inc. (ERTS) Message Board

  • overrated_author overrated_author Jan 31, 2011 5:01 PM Flag

    ERTS = buyout candidate

    this is such a no-brainer

    reminds me of Sun Microsystems in 2008

    everybody was down & out on the company

    Sun had a great balance sheet, good products, relevant technology

    ERTS is going to get bought out by Disney or Apple if you ask me...

    mobile gaming is the future, ERTS are #1 and will start to sweat their development capabilities better in 2011 and 2012

    this will look like a different company in a year, two from now.

    great balance sheet, no long-term debt, over $1.0bn in net-cash

    i own the $16 calls...

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    • Disney has already gone on record as paring back their efforts in the conventional gaming spaces to focus more on social games. They already have Playdom, so it's unlikely ERTS would be a target of the Mouse.

      MSFT+ERTS has been a topic of speculation for over a decade. Rumors were flying several years ago about the usual MSFT suspects involved with takeovers being seen in the lobby at EARS #205. The assumption was a takeover was imminent. It wasn't. I'm not holding my breath now.

      AAPL+ERTS doesn't make much sense on a number of fronts. They already work together in a way that adds more value to AAPL than vice-versa. Why would Jobs buy the cow when he's getting the milk for free?

    • gaming is more important for MSFT than ever before - they're growing/investing here

      as for Apple, they're very hardware dependent - need more software recurring revenues

      Disney is a great fit, could share media/intellectual property rights

      gaming is a very innovative field and usually drives adoption of new technologies

      all of these guys have the balance sheet and excess cash to swallow ERTS without pain

    • I don't see why MSFT or AAPL would want this company. MSFT does their own games/apps, and AAPL has thousands of people doing games/apps for them. Why spend the money? DIS might be a candidate, but here again I don't see a good fit.

      I'm holding these shares, but honestly I don't know why.

    • Options Disclosure: 160 Jan.2012 30, 80 Jan.2012 22.5 and
      40 Jan.2012 20.

      I really hope that nobody at ERTS gets squirrely and thinks this would be a good time to sell out. My experience with takeovers has been normally to see about a 30% premium over closing price the day before the announcement. In ERTS's case that would result in $24.09 per share. Not really what I'm hoping for. If SWTOR has the bang that I am looking forward to (not counting all the online/cell phone games coming out) then I don't think 35 - 40 pps is out of the question during 2011. If SWTOR has a really fantastic reception, things could go even higher, depends on the hype.

      I was around in 2000 when 3COM spun off their PALM division. What a ride; should have known when to get off though. I saw a modest investment in options trading turn into over $2,000,000 only to watch it vaporize just as quickly within days of the spinoff. Having done that once, however, I know what I did right and I know what I did wrong. ERTS may offer the same sort of potential if a few things go right. If they do, I intend to utilize the lessons I so painfully learned with 3COM/PALM to my advantage. Good luck with your options and ERTS investment. dales53

    • I think that the price action on Thursday and Friday after earnings was very positive.

      Not only did ERTS hold the spike up, it closed higher into the weekend.

      This is a technical breakout that had an earnings/buyback catalyst, should hold $18 level.

      Next steps;

      buy call options $19, $20 strike. for those who wish to move up the risk spectrum and bet on a full takeover, put some speculative capital into the $22.50 and $25 calls 3-6 months out. MSFT is the perfect candidate to buy this company. they typically do small deals around $1.0bn or less. but with their growing presence in gaming, MSFT need to own an asset like ERTS, they just can't recreate the platform, title release potential and licenses etc. My valuation work on ERTS shows $28 worst case, $31 base case, $34 best case in a takeover. valuation attractive:1.2x EV/Revenue vs. 2.4x for Activision... I think that a 100% premium in a takeout is not only possible, but also probable.

      Disclosure;

      long call options ERTS Feb/Mar/Jun 2011

      • 1 Reply to overrated_author
      • I agree that ERTS would be a great aquisition, but with the upcoming release of SWTOR and it's ability to be a fantastic cash cow for ERTS, I hope that there is no sale. While I don't disagree with your figures, as currently valued, I think that ERTS has, assuming the SWTOR release goes on as planned, the capability to be a 40 plus pps stock in 2011. All that said, I'm putting my bets in the January 2012 calls. That allows for some possible delays, yet still presumes a 2011 release and the jump in pps that will bring about. Barring some unforseen disasters, ERTS is like a tight spring waiting to uncoil...I'm in Jan. 20's, will buy a spread from 22.5 all the way to 30 as price action allows. Good luck. dales53

    • Your response to the OP makes you an idiot. The purpose of these boards is to discuss the stock, not immediately insult someone and then attempt to speak for everyone. This type of behavior marks you as an idiot. If you don't want to be one then don't act like one.

    • There is nothing but upside. Any analyst with a target below $16 for February is a moron.

      I see $20 by April 2011

    • I wouldn't rule out Disney, agreed.

      They have a track-record of M&A, if you recall the Marvel deal in 2008.

      They could use ERTS as an outlet for 'sweating' their vast intellectual property thru gaming.

      In an era of mobile gaming and internet TV etc, there are synergies to be had for sure.

      ABC, Marvel, ESPN, Disney etc -- a ton of media rights. Gaming ties in to that nicely.

    • OR DISNEY will COME IN WITH A BETTER BID @ $29-$32

    • overrated....

      I didn't mean to come off sounding like a jerk. We are all entitled to our opinions, and you certainly have the right to express yours as well. I have just heard all those arguments before.

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