Electronic Arts Inc. (NASDAQ:EA)’ mobile and handheld revenue was up 30% year-over-year to $103 million, with 73% growth driven by smartphones and tablets. Results were driven by Real Racing 3 (the top racing title on Apple) and The Simpsons (top five grossing game on Apple). The company is better known for its Madden NFL, Need for Speed, Battlefield, StarWars MMO, and the The Sims franchises.
On a shorter-term basis, investors can be optimistic regarding Battlefield 4’s pre-order data (on consoles and PC). Based on critical reviews on YouTube and gaming forums, the new release should perform at least in-line with Battlefield 3 (and could outperform similar shooting games launching near the holiday season).
Longer term, the company is banking on the potential success of recently announced Star Wars games, as Disney is aiming to make its interactive unit profitable. Electronic Arts Inc. (NASDAQ:EA) has received the right to develop new Star Wars games for consoles, computers, and mobile devices. While financial terms and other details were not released, the partnership could provide tremendous upside for Electronic Arts Inc. (NASDAQ:EA).
Disney is planning to release a new Star Wars film every year starting in 2015, with video games likely to follow. According to various blogs, the first game will “most likely” debut around the same time as the movie (a very brief teaser can be seen on Youtube here) in what Electronic Arts Inc. (NASDAQ:EA)’ executives have dubbed as a “rebirth of the brand.”
Conclusion
Zynga’s $1.5 billion sitting idle on the balance sheet could be used to invest in new ventures or be committed to a larger buyback (only $200 million is currently authorized). The cash gives Zynga a good amount of breathing room and could be a large source of upside if used in the right way.
Hiring former Xbox boss Don Mattrick gives the company inside knowledge on how to fend off competition from Microsoft Corporation (NASDAQ:MSFT). On the other hand, the high level of senior management turnover can undermine vendor confidence, while making it more difficult for investors to assess the company’s strategic goals.
All that being said, I believe Zynga Inc (NASDAQ:ZNGA) offers nothing attractive to shareholders as the stock is unlikely to recover from its March 2012 highs. Electronic Arts Inc. (NASDAQ:EA), on the other hand, has seen a consistent rise in share prices since July as investors are regaining confidence in the company’s ability to release popular games over the years to come.
From what I have read, Microsoft Corporation (NASDAQ:MSFT) is set to dominate the console wars, and with an impressive game lineup announced, I can’t see how Zynga can compete against these two companies.
The article Is Zynga Finished? originally appeared on Fool.com and is written by Jayson Derrick.
Jayson Derrick has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
