Janco: EA To Announce Major Cost Reductions, IP Acquisitions

Ahead of Electronic Arts' fiscal 2008 Q1 results expected on August 1st, Mike Hickey of analyst group Janco Partners has predicted that Q2 will see the publisher execute a "quantifiable cost reduction plan," as well as look more strongly at acquiring IP rather than producing it internally, with Take Two noted as a recommended target.

Q1 Performance

Hickey expects the publisher will report Q1 results in line with its guidance and continue to maintain its fiscal 08 goals, with strong performance of Harry Potter, Command and Conquer 3, and titles from its Sims franchise.

"While we believe their operating prospects look exceptional deeper into the current console cycle, they have suffered in the near term from poor product quality, escalating operating costs, and a misaligned resource allocation focus," said Hickey, adding that fiscal '09 might change that with a lineup of potential big earners including Spore, Sims 3, Rock Band 2, Warhammer Online and a slate of casual content for Wii, DS and online. The titles are in addition to perennial hits like Madden.