The old one was pretty simple: EA and Activision Blizzard
But then Apple
Now, you can't sell anything without a clear strategy for online, social, mobile, casual gaming -- preferably all rolled into one. Epic quests have given way to achievement badges for harvesting 100 types of turnips. And woe betide the game that doesn't get along with the standard Web browsers on iPhones and Androids. Nintendo, once bulletproof enough to define its own path, now looks ridiculous for actively standing apart from the mobile/social revolution.
So EA is doing its best to stay in the game. The Sims Social is currently the second-most popular Facebook game, according to EA's estimates. The PopCap Games acquisition has closed, so EA now stands behind the popular -- and topical -- Plants s. Zombies product as well. Digital sales in the just-reported second quarter jumped 30% year over year, and these forward-looking strategies got top billing in the earnings release.
That's great, because it means that EA is thinking hard about the issues that matter most in today's changing market landscape.
But is it good enough?
Total second-quarter GAAP revenue gained 13% year over year, largely thanks to the digital push. But adjusted earnings were slashed in half to land at $0.05 per share, and the operating cash flow was 57% more negative. On a trailing basis, to smooth out seasonal effects and single-shot hits or misses, adjusted earnings are up but cash flows are down.
I'd sum that up as a negative general trend. But Mr. Market seems to disagree: EA shares have climbed 47% in 2011, absolutely crushing Activision and the Dow Jones
I'm thinking that EA investors are setting themselves up for a fall here. Will the gaming titan sink or swim? Only time will tell. Add Electronic Arts to your Foolish watchlist for a direct line to news and analysis on the stock so you won't be blindsided by whatever comes next.
Fool contributor Anders Bylund holds no position in any of the companies mentioned. The Motley Fool owns shares of Take-Two Interactive Software, Activision Blizzard, and Apple and has written calls on Activision Blizzard. Motley Fool newsletter services have recommended buying shares of Apple, Take-Two Interactive Software, Activision Blizzard, and Nintendo. We have also recommended creating a bull call spread position in Apple and a synthetic long position in Activision Blizzard. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Check out Anders' holdings and bio, or follow him on Twitter and Google+. We have a disclosure policy.
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