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EA's Star Wars Set to Release

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Electronic Arts Inc. , aka EA, is set to showcase Star Wars: The Old Republic live on December 20, in North America and Europe. However, customers who preordered the popular Massively Multiplayer Online Role Playing Game (MMORPG) have been allowed to preload the game and play from December 13.

This move by the company was to ensure that the servers function properly without any hitches on the first day of launch. The company had to go in for this testing as reports suggested that the game would have millions of fans who would want a first-hand experience of the game.

Very recently, with millions of players trying to access Battlefield 3, EA had encountered a glitch in its servers on the very first day of the game’s launch. This time the company is not taking any chances with Star Wars, which is predominantly an online game, with any technical interruption having the potential to significantly impact user experience, and thereby, the reputation of the company.

The game has already received accolades from its Beta testers who have admired its innovations and story-driven plot. Players are faced with epic journeys that involve dynamic combat across the Star Wars galaxy. Players have the choice to join either the Galactic Republic or Sith Empire forces, with an option to choose from the various characters.

Electronic Arts has been betting on the success of this game and left almost no stone unturned to publicize the game. With the pre-order rush and fan following that the franchise has, Star Wars: The Old Republic should be a great success.

This release would not only boost the company’s top line for the current quarter, but would also pose competition for Activision Blizzard Inc.‘s (ATVI - Snapshot Report) Call of Duty franchise. Activision seems to have a clear advantage over Electronic Arts for the Christmas season, but this release should narrow the gap.

Electronic Arts is a traditional game developer and marketer and has significant exposure in the online gaming, social games and mobile gaming arena. We believe that EA’s significant exposure to digital gaming will boost its top-line growth going forward. EA has made significant acquisitions such as Klick, PopCap games and Playfish over the last couple of years to bolster its presence in the social and mobile gaming market.

We believe that Electronic Arts has a strong product pipeline that will drive top-line growth going forward. The company’s high-quality titles, impressive product line, increasing online exposure, social games and portfolio diversification guarantee market share gains over the long term.

However, the gloomy macro-economic environment, increasing competition and weak video game sales results over the last 12 months, compel us to remain cautious in the near term.

We therefore have a Neutral recommendation on Electronic Arts over the long term (for the next 3 to 6 months). For the short term (1-3 months), we also have a Hold rating on the stock, as indicated by the Zacks #3 Rank.

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