Viacom Shuns EA Buy
Date: Saturday, June 05 @ 09:07:52 UTC
Topic: Xbox Gaming
According to a story published by Reuters, Viacom Chairman and Chief Executive Sumner Redstone denied recent speculation that the cable and entertainment giant might purchase Electronic Arts.
"We have looked at the obvious companies like Electronic Arts, which is clearly the leader in the field... but their price is so high, it would be dilutive to our earnings. We have ruled it out," he is quoted as saying at a conference in New York.
Electronic Arts is a behemoth of the video game industry, and is estimated to be worth possibly $20 billion or more -- a significant price barrier, even for a company as formidable as Viacom.
Still, the Reuters article points out that many industry analysts feel the two companies would make a good fit, if the price were not such an issue. Video games are quickly gaining cache as an important form of distribution.
Interestingly, Sumner Redstone did recently stake his claim in Midway Games, by purchasing a controlling percentage of stock in the company. He has strongly maintained, however, that the purchase is his alone, and not part of a move by Viacom.
Ultimately, a price as high as EA's valuation would demand that the newly combined company show very strong profits -- a possibility, but certainly not a guarantee, making the proposition of such a purchase very risky.
Admin Comment
Whether or not such a massive merger takes place in the future, the fact that industry analysts are now speculating on such activity is good indication of how powerful the games industry has become both in the larger entertainment sector, and in the economy as a whole.
Two years ago, I held $20,000.00 of Viacom Stock. I couldn't resist selling when it hit 60+ per share. Even though on the surface it doesn't look like this merger may happen, I am wondering if it is smoke and mirrors in order to keep EA's stock from rising too high. This way, Viacom doesn't have to shell out any more money. Throughout my years of holding their stock, it still wouldn't surprise me if they still go for it. I just wish I wouldn't have sold now. Would be nice to say I own a piece of EA:)
News Source: Reuters and IGN
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