Back to top

Analyst Blog

Electronic Arts Inc.’s (EA) launch of its latest game from the “SimCity” franchise was reportedly affected by technical faults, which arose from "server instability". EA stated that the problem with the servers was due to the fact that a large number of players were trying to log on to the network simultaneously. The game was launched last Tuesday (Mar 5, 2013).

To salvage the current situation, EA has deployed additional servers to support the game. Moreover, the company also announced that it would provide registered players with a free PC version of the game.

The modern version of the 1989 classic game, SimCity, has received a metacritic rating of 71 and is expected to be as popular as its earlier versions.

Though the problem related to the servers is a temporary issue, we had expected EA to have been more prepared this time as it had faced similar server-related problems during the launch of Battlefield 3 in Oct 2011. At that time also, a higher-than-expected number of player log-ins was cited as the cause of the problem.

However, we think that too many players logging in is a good problem to have EA should see higher customer engagement going forward. However, if the technical problems become a regular phenomenon, it could have an effect on customer preferences and eventually affect sales.

We believe that given EA’s variety of titles and massive fan following, it is better equipped to gain traction in the digital format than most of the other new players. This will also help it to counter stiff competition from Activision (ATVI - Snapshot Report), Zynga (ZNGA - Snapshot Report) and Take-Two Interactive (TTWO - Snapshot Report) going forward.

However, we believe that EA faces a number of headwinds that include overall weakness in video game demand, particularly due to weakness in retail sales and an aging console system lifecycle. Additionally, the huge popularity of free-to-play games is also cannibalizing higher-priced packaged video games sales, which is a major concern in our view.

Currently, EA has a Zacks Rank #3 (Hold).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
TRIQUINT SE… TQNT 20.67 +6.52%
RF MICRO DE… RFMD 12.47 +6.04%
VASCO DATA… VDSI 14.77 +4.68%
STRATTEC SE… STRT 80.24 +3.00%
PATTERSON-U… PTEN 34.54 +2.98%