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Slimebeast on 13 May 2008
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Bodhesatva said:
Slimebeast said:
Bodhesatva said:
jheco05 said:
So less their big acquisition, EA actually made money.

No. Again, M&A are already balanced before net income is calculated. EA plain old, flat out, lost money.

 


I don't get it. The $620 million expenditure for aquisitions of Bioware & Pandemic is higher than the $454 million net loss. That should mean 620-454= +$166 mill profit for the "EA plain old", just like jheco05 said.

Care to explain?


Again, they're balanced in before net income is calculated.


Specifically, the 620 million spent to buy the companies is balanced out by the sudden, 620 million dollar increase in corporate assets. Although in the case of BioWare and Pandemic, the market decided that these assets were overvalued, and were not actually worth the 620 million spent. Therefore, EA DID lose money on the deal, but only 138 million.

If this wasn't done, lots of financial reports would look very silly. What would happen if Microsoft had bought Yahoo, for example? It would be absurd to post a 50 billion dollar loss for the quarter. That wouldn't be meaningful. Thus, these things are mathematically "canceled out." 


Thanks, great explanation. I liked the Yahoo-example.

So bottom line is EA "plain old" lost $454 million.

Now, a question follows from that. How on earth is it possible (not that it is a bad thing, because I hate EA)? I thought EA were money-makers, making profits in the 20% ballpark. And if you look at their titles last year, IMO it's like it's always been, cash cows none of which seem very high budget (except Crysis compared to it's rather weak sales).