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Wii don’t need no EA-ducation

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Courtesy of the folks (or folk) at Information Arbitrage, EA, developer of video game titles from the Madden franchise to Gantchiqui Dithurbide’s Professional Jai-Alai 2005, is quickly trying to rethink its next gen console strategy, with a surging Wii and struggling PS3. EA’s success during the last generation of consoles was attributable to its releases on the PS2, which dominated the gaming market by shipping over 100 million consoles worldwide. Fair enough, this time around, EA similarly bet on the success of the PS3. Whoops. Since late November EA has suffered a significant loss in share price ($8) and subsequently almost 15% of its market cap (over $3bn).
Wii is outselling the PS3 in the US and in the last month, Wii is outselling the PS3 by 3:1 margin in Japan (Microsoft continues to struggle in Japan, with Xbox 360 sales a distant third). Games for the Wii can also be developed at almost 50% of the cost per title than games for other systems, a fact that THQ and Ubisoft, game developers with successful Wii titles in the market, are realizing with profit and margin increases. EA has 25 titles in development for the PS3 and only 6 titles expected for the Wii by the end of the current fiscal year.
EA released FY Q3 earnings on 2/1 and posted nearly flat revenue for the period compared to a year ago but lower adjusted earnings. Its shares initially gained 6% upon the announcement, but those gains were erased in the ensuing week. EA (Nasdaq: ERTS) is currently up over half a per cent in daily trading at $50.44 per share.
EA Revisited: Playing Catch Up on the Wii, Waking up to the Failure that is PS3 – [Information Arbitrage]



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