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EA's Timely Launch of PGA Tour

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Golfing fans are all set to get busy with their virtual PGA tours ala Tiger Woods style from March 30, 2012, when Electronic Arts Inc.’s (EA - Free Report) Tiger Woods PGA TOUR 13 and Tiger Woods PGA TOUR 13:The Masters Collector’s Edition hit the stores.

Developed by EA Tiburon, both these games will be available on Microsoft Corp.’s (MSFT - Free Report) Xbox 360 and Sony Corp.’s (SNE - Free Report) PlayStation 3. Tiger Woods PGA TOUR 13 is priced at $59.99 while Tiger Woods PGA TOUR 13: The Masters Collector’s Edition will be available for $69.99.      

Apart from the regular features, the latest editions consist of new attractive features like the revamped swing mechanics, which help the players to better control the swing tempo, ball position and stance. Additional features include “voice-enabled and controller-free sports simulation”. It consists of “Tiger Legacy Challenge mode” where gamers can experience the golfing legends past achievements. Moreover, the games have a social feature where gamers can compete against one another and earn points.

Tiger Woods recently returned to his winning best at the Arnold Palmer Invitational after two-and-a-half-year drought. Thus, we see the release of the games to be perfectly timed. Over the past few years, Tiger Woods had to deal with several personal life scandals, which overshadowed his sporting feats. During that phase, EA also witnessed a slump in demand for the game.

Cashing on Wood’s recent victory, EA’s PGA franchise is expected to see sales rebound and regain its former glory. EA has earned a name for developing and publishing quality games over the last few years. The Tiger Woods PGA TOUR franchise is of the same genre and will gain significant customer response going forward, in our view. We note that this is the 22nd season of the franchise and its popularity reflects significant fan following, which will drive growth going forward.

EA’s pipeline consists of high-quality titles and most popular franchises. Moreover, with the increasing online exposure, social games 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. Competition from Activision Blizzard Inc. (ATVI - Free Report) , Zynga Inc. and International Game Technology (IGT - Free Report) may act as headwind going forward.

Moreover, the whole video game industry has been plagued by weak consumer spending and troubled economic conditions. In February, Electronic Arts’ much-awaited Kingdoms of Amalur: Reckoning ranked fourth among the top-ten games. However, EA’s Battlefield 3 seemed to have lost its sheen and plummeted to the 10th spot from the fifth position that it held in the preceding two months, according to market research firm, The NPD Group.

Despite the dismal figures in February, analysts tracking the video game industry believe that few big game launches from bellwether publishers might boost revenues in March. Games including Nintendo’s Mario Party 9, Konami Corp.’s Silent Hill Downpour and Capcom’s Resident Evil: Operation Raccoon City are slated to be launched in March. Incidentally, EA’s much-coveted Mass Effect 3 has already been released and has received a huge response.

Additionally, we believe that companies with significant exposure to the digital business will stand out even in this sluggish market. Moreover, new game releases and improvement in consumer spending will act in favor of the industry.

We have a Neutral recommendation on EA over the long term (for the next 3-6 months). Currently, EA has a Zacks #3 Rank, which implies a ‘Hold’ rating in the short term.

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