Analysts keen on PopCap purchase

By Brenna Hillier
14 July 2011 00:00 GMT

Analysts have responded positively to EA’s acquisition of casual king Popcap.

“With the retention of top management and an incentive program to keep key talent, PopCap’s acquisition is good for both EA and consumers in the long-term,” the EEDAR’s Jesse Divnich told Industry Gamers.

“The PopCap acquisition is very positive for the mobile and social segment as it adds additional validity to the multiplier used to calculate a company’s value. Just knowing that major acquisitions are still occurring in the space is very positive for investors, which will likely fuel additional investments into the space.”

However, Divnich was cautious about hailing EA asthe digital leader.

“In terms of being the [number one] digital powerhouse, that is difficult to measure,” he said.

“The digital space is very fragmented at the moment, and aside from Zynga, there really is no clear leader in the digital space. In traditional gaming, the top ten publishers may make up the majority of physical video game revenue, but in the digital space, you would need to sum the revenues of hundreds of companies to get to a majority.”

Wedbush’s Michael Pachter echoed his sentiments, adding that “EA must really believe the growth profile to justify that price”.

“Though the costs may be high, the opportunities in digital casual gaming are large and growing much faster than EA’s traditional packaged goods business.”

Pachter did warn that investors would be unimpressed if PopCap was slow to pay dividends on the massive asking price.

Sterne Agee’s Arvind Bhatia dismissed these concerns.

“We believe the acquisition of PopCap Games is a good strategic fit for EA and believe the valuation will appear reasonable in comparison to the valuation expectations for Zynga’s upcoming IPO,” he said.

Still not sure what it all means to you at home? Nathan’s done a bit of analysis for you.

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