Are Electronic Arts' Major Software Delays Actually Good For Investors?


Source: Battlefield.com

Electronic Arts (NASDAQ: EA  )  has released the results for its most recently completed fiscal quarter, and the numbers should help the gaming publisher continue its impressive run. Company shares trade approximately 60% higher today than they did a year ago, and the publisher looks to be in good shape to navigate changes in the gaming industry.

The company delivered quarterly non-GAAP revenue of $775 million, substantially outperforming guidance earnings of $700 million. Non-GAAP earnings per share came in at $0.19, well above internal guidance of $0.05, thanks to increased revenue, better margins as a result of digital sales, and reduced operating expenses.

EA's quarterly report is packed with positive indicators, but the impressive fiscal performance was also paired with the news that two of the company's biggest upcoming games have been delayed. What does this mean for investors? Will the move to push back titles be as successful for EA as it recently was for publishing rival Ubisoft (NASDAQOTH: UBSFF  ) ?

EA announces delays for key upcoming games
The impressive earnings report was coupled with news that Battlefield Hardline and Dragon Age: Inquisition have been pushed to later release dates. Hardline has been delayed to an unspecified date in 2015, while this year's Inquisition has been moved from an October date to a November 18 release. These moves come as EA is making efforts to rework its development practices and improve the quality of its output.

June saw EA put forth comments indicating that it was undergoing a fundamental shift in the way that it makes games. One of the primary goals of this change was to make sure that software was functional and ready for testing at an earlier stage in development. The need for public statements about plans to switch up its production model came as a result of consumer dissatisfaction with 2013's Battlefield 4.

Battlefield 4 damaged the broader series
Given the amount of controversy tied to the most recent entry in the "Battlefield" series, it's not surprising that EA has chosen to delay the next game in the franchise. Battlefield 4 was broadly faulted by consumers for having game-breaking bugs and spotty online functionality, and the title reportedly required numerous updates to run properly. While EA first stated that it was satisfied with Battlefield 4's launch, CEO Andrew Wilson later commented that the product's debut was unacceptable. This apparent change of heart seemed to coincide with rising concerns that the broader "Battlefield" franchise had been damaged by a substandard release. These concerns were later compounded by pre-release tracking that suggested Battlefield Hardline was heading for a disappointing performance.

EA aims to take better care of its franchises
Dragon Age: Inquisition is also following up a sequel that received a mixed reaction at the consumer level. While the original Dragon Age seemed to win over a great many fans, the reception for Dragon Age II suggested that the series' future might not be so bright. While an approximately month-long delay for Dragon Age: Inquisition won't give developers much time for additional tinkering, it seems clear that EA is aiming to avoid damaging valuable properties by ensuring that series entries receive more time in the oven.

Delays can be a good thing
While delaying key software is often a bad sign, French publisher Ubisoft has recently shown that the move can pay off handsomely. Its premier new IP, Watch Dogs, was originally scheduled for a holiday 2013 release, but was pushed back to May 2014. The game has shipped more than 8 million units and currently stands as the most successful new gaming IP on record. The extra development time and move to a less crowded release window likely did great things for the title. It's worth noting that the initial news of the Watch Dogs delay caused a sharp decline in Ubisoft's valuation, however it's unlikely that EA's share price will be similarly effected by its own software delays.

Foolish final thoughts
For investors, EA's decision to delay Battlefield Hardline and Dragon Age: Inquisition may be best viewed as a smart reaction to unfavorable conditions. The company's broader aim to improve the quality of its software and prevent significant misfires is evidenced by the recent delays, and the move should help Electronic Arts to preserve and grow its valuable properties. Hardline in particular looks to benefit from additional development time and the move to a more a favorable release window. Regardless of these bumps in the road, the company remains an advisable investment option.

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