With the massive Activision/Vivendi deal creating Activision Blizzard and knocking Electronic Arts down a peg on the global third-party publisher ladder, GameDaily BIZ wondered what EA might do to counter the new Activision giant, or if they would do anything at all. We surveyed four leading analysts on the topic: Mike Hickey, Michael Pachter, David Cole and Colin Sebastian.

The following analyst commentary provides some fascinating insight into the possibility of EA acquiring Ubisoft, Take-Two (although Chairman Strauss Zelnick said recently Take-Two is not for sale), joining a large media company and other scenarios.

Mike Hickey, Janco Partners:

We believe Electronic Arts' game plan remains essentially unchanged after the recently announced Activision Blizzard merger. We expect management will continue their efforts at improving game quality, developing the Asian market potential, cutting operational costs, introducing new IP and making acquisitions which compliment their current portfolio of games. That said, we believe EA would be well served to acquire Take-Two Interactive.

Electronic Arts recently acquired BioWare Pandemic for over $850 million, which effectively complements their current product portfolio in addition to offering a large MMO potential. It's rumored BioWare is working on a Star Wars MMO for release in CY 09/10. While the game has a couple years of development before release, the rumored Star Wars IP has a created a chill of excitement in the industry. Yet, the deal seems expensive and in our view focuses a great deal on the success of their MMO release, which could prove exceedingly difficult given the competitiveness of the market.

We believe the company has the financial resources for continued acquisitions to fuel financial performance growth. The most obvious potential acquisition in our view would be Take-Two Interactive. Take-Two has built a 2K Sports publishing division which competes head to head with Electronic Arts. Unfortunately, 2K Sports remains unprofitable, burdened with lower product margins from license agreements and Electronic Arts' ability to leverage shelf space. However, 2K Sports generally receives higher quality scores than some of EA's competitive products and recently announced their NBA games were outselling EA's NBA game. Bottom line, video game quality matters for gamers regardless of the marketing influence from mega corporate brands like EA Sports. EA's acquisition of Take-Two would eliminate their most powerful competitor in the sports market, improve their overall sports portfolio product quality, allow entry into sports categories currently protected by exclusive licensing agreements (MLB), and with essentially the same cost structure.

In addition to strengthening the EA Sports Division, a Take-Two acquisition would capture arguably the most powerful IP in the world, GTA. We believe it's entirely possible the estimated April '08 release of GTA IV could eclipse the $300 million in 1st weeks sales Halo 3 produced. Importantly, if EA is really looking for acquisitions that complement their current product portfolio... then they should be thinking about the ground and pound genre GTA currently has a stranglehold on. Last time we checked all of EA's financial resources couldn't bring their Godfather franchise off its knees at retail or above an 80 at Metacritic. If EA is honestly interested in spending the development dollars for an MMO release, why not work with the team at Rockstar and produce a non-licensed GTA MMO? How difficult is it to imagine several million subscribers signing up for a GTA MMO in the first couple months after release? Not very. Besides the monster sized franchise of GTA, you have ownership of AAA franchises including BioShock, Midnight Club and Civilization.

Most importantly, Take-Two has a current market cap of $1.25 billion, suggesting EA could potentially write a check for Take-Two before the release of GTA, which would likely fall into EA's fiscal '09 period. We expect EA's financial growth prospects would likely benefit from a fiscal '09 release of GTA IV, Midnight Club, Civilization, and an iron lock on the domestic sports game market.

Michael Pachter, Wedbush Morgan Securities:

I don't think that they'll do anything. They were already competing with both companies, and the combination doesn't change that. Activision has no money for at least a year, and EA should just stick with their strategy. Ubisoft is probably too expensive for them, and the other companies don't add all that much.

EA has no interest in TTWO, too much to turnaround, and no guarantee of keeping the talent. EA has enough problems with their own turnaround, doesn't need the headache. The Rockstar contract expires in 14 months, so there's too much risk that those guys pull a Bungie. It's smarter to wait until they are free agents and negotiate directly with them. Also, if Rockstar is worth $1 billion, how much goes to the employees and how much to TTWO shareholders? It doesn't make sense that the employees would transfer over in a sale.

Next page: Colin Sebastian and David Cole weigh in...