Electronic Arts Inc. (EA): Why I’m Optimistic

The Walt Disney Company (NYSE:DIS), the leading media and entertainment conglomerate and the owner of Star Wars franchise, has reported strong quarterly results. A significant development occurred on the Star Wars front when Disney awarded the license to develop the games of the franchise to Electronic Arts Inc. (NASDAQ:EA). Naturally, The Walt Disney Company (NYSE:DIS) is shutting down LucasArts, the original developer of the games. The Star Wars brand is certainly going to be a healthy addition to EA’s pipeline, which has under-performed compared to its rival Activision Blizzard, Inc. (NASDAQ:ATVI).

Disney’s current quarter will also include the millions it has made on Iron Man 3. The blockbuster movie reported U.S. sales of $175 million from the debut alone, while overall global turnover has been $680 million. On the other hand, Time Warner Inc. (NYSE:TWX)’s DC Comics has not been able to mimic the success of Disney Avengers.

Disney reported its earning earlier this month for the second quarter ending March, 2013. Its revenues rose 9.6% to $10.55 billion, while net income increased by an impressive 32.4% to $1.51 billion, or $0.83 per share. The strong growth in earnings is credited to the theme parks, ESPN cable network and, as indicated above, the film studio’s performance.

The Walt Disney Company (NYSE:DIS) gets 47% of its total revenues from the Media Networks segment, which forms its biggest segment. Here, the cable networks revenue rose 9% to $3.46 billion, while broadcasting revenues fell by 2% to $1.50 billion due to a decline in ABC television network advertising revenue as a result of lower ratings. Parks and Resorts also reported increasing sales due to the multimillion dollar investments made in 2012 on domestic theme parks, which caused an increase in guest spending and attendance.

Some recent reports have also suggested that Disney has started working on the next version of a Star Wars animated television series, which could come out in the fall of next year.

EA will now develop Star War games for consoles, computers and mobile devices. Electronic Arts Inc. (NASDAQ:EA) has been trying to improve MMO (Massive Multiplayer online) games and is hoping that these efforts will provide the necessary infrastructure to develop popular titles like Activision Blizzard, Inc. (NASDAQ:ATVI)’s ground-breaking series’ Call of Duty, Diablo and World of Warcraft (WoW).

Electronic Arts Inc. (NASDAQ:EA) has opened a new studio in Las Angles, which will be used by its development team DICE which will work on Star Wars. The studio also aims to lure other talented developer from its rivals. By the end of this year, DICE plans to recruit 60 staffers. Gamers would remember DICE as the studio behind the success of “Battlefield 3,” which sold 17 million copies and generated an enormous subscriber base of 3.5 million. The studio is also planning to release “Battlefield 4” in fall.