Video game developer and publisher, Electronic Arts (ERTS) better known as EA, announced that the new expansion pack of The Sims 3 Generations will be available at stores globally from next week.

Developed by The Sims studio, The Sims 3 Generations allows players to create and live in a virtual world. The Sims franchisee celebrated its tenth anniversary in 2010 and has sold more than 125 million units to date.

The Sims 3Generations enables gamers to play as they want. They have the liberty to design houses as a builder, create moments as a storyteller, be mischievous as an experimenter, or fulfill lifetime wishes as an achiever.

The Sims 3 Generations players can capture and keep track of their Sims’ life moments with an in-built video camera and through the new memories system, players have the option of uploading and sharing their Sims’ memories on Facebook and www.TheSims3.com.

We believe the success of The Sims franchisee demonstrates EA’s continuous endeavor to produce quality products. EA delivered 15 titles rated 80 or above by Metacritic in fiscal 2011.

Moreover, EA has reduced its exposure to the declining packaged goods sector. EA is focused on developing promising intellectual properties (IP) that could generate higher revenues and profits for the company. In order to achieve the target, the company has reduced the number of title releases to 22 for fiscal 2012 from 36 in 2011, 54 in 2010 and 67 in 2009.

Consequently, the company has decreased the distribution of low-margin games as well as reduced its exposure to the declining music games genre.

EA is trying to gain a strong foothold in the emerging digital and social network market. With increasing adoption of smartphones and portable devices, EA intends to develop its digital distribution business.

EA earned revenues of $743.0 million from the digital segment in fiscal 2011 versus $522.0 million in fiscal 2010. For fiscal 2012, digital revenue is expected in the range of $1.05 billion to $1.1 billion.

Electronic Arts is trying to expand its footprint in the social gaming market. EA has signed a five-year agreement with Facebook to expand its reach on social networking sites and deliver enhanced gaming experience to gamers.

We believe that the social gaming market is well positioned for continued growth, primarily attributable to its casual, social and interactive environment compared to the more conventional platforms.

In our view, the acquisition of the leading social games company Playfish (revenue soared approximately 100.0% year over year in the fourth quarter) and Chillingo will enable Electronic Arts to expand in this sector and strengthen its position in new gaming platforms in the digital and social gaming genres.

Recommendation

We believe that the high quality titles, impressive product line, increasing exposure to online and social games and diversification of portfolio guarantees market share gains over the long term.

However, cut throat competition from Activision Blizzard Inc. (ATVI), Take-Two Interactive Software Inc. (TTWO) and from social network company Zynga may act as a headwind going forward.

Currently, Electronic Arts has a Zacks #3 Rank, which implies a Hold rating in the short term.

 
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