(ERTS) Electronic Arts Unveils Battlefield 3 Editions

Video game developer and publisher, Electronic Arts (ERTS) better known as EA, announced the launch of two editions of its highly anticipated Battlefield 3 and some unique pre-order items at participating retailers in North America.

Battlefield 3, which has been developed by EA studio DICE, is scheduled for release on October 25, 2011. Battlefield 3 was initially expected to release later in November. According to EA, Battlefield 3 pre-orders are 10 times higher than those of Battlefield: Bad Company 2.

The latest Battlefield game will run on EA’s Frostbite 2 game engine. EA intends to use the Battlefield release to showcase its new online service called Origin, which will allow players to download expansion packs and full PC versions of the company’s games.

The newly released Battlefield 3 Standard Edition allows players step into the role of elite U.S. Marines. The single-player campaign takes gamers to diverse locations such as Paris, Tehran and New York City. The standard edition comprises 10 massive co-op maps as well as multiplayer modes.

The Battlefield 3 Limited Edition includes the deep and immersive Back to Karkand post-launch digital expansion pack. Players, who preorder Battlefield 3, will get an assured copy of the Limited Edition at no extra cost. For $14.99, gamers can also separately purchase four of the most celebrated maps from Battlefield 2 including Strike at Karkand, Gulf of Oman and the SharqiPeninsula.

EA also announced the availability of a number of promotional items to Battlefield 3 pre-order customers at select retail outlets. These include Physical Warfare Pack, SPECACT Kit and Dog Tag Pack. Physical Warfare Pack includes deadly weapons such as Type 88 light machine gun and the SKS sniper rifle flash suppressor.

SPECACT Kit allows gamers to expand their customizable options in Battlefield 3 with a set of eight unique multi-player skins, one for each class in Battlefield 3. The Dog Tag Pack allows gamers to customize their soldiers. The current pack contains five unique dog tags.

EA is scheduled to release a multi-platform beta for Battlefield 3 in September 2011. The game will run on Sony Corp.’s (SNE) PlayStation 3, Microsoft Corp’s (MSFT) Xbox 360, as well as on PCs.

Battlefield 3 is expected to face stiff competition from Activision Blizzard Inc.’s (ATVI) Modern Warfare 3, which is scheduled for release on November 8, 2011. Both the games boast strong visual graphics. However, Battlefield 3 is more PC oriented compared to Modern Warfare 3, and will likely hold the edge as the PC version will support servers with up to 64 players. On the other hand, the console version of Battlefield 3 will be limited to 24 players.

Moreover, EA commented that the players can use the online multi-player services that come with the game for free. Recently, Activision announced the launch of Call of Duty Elite, which will charge monthly subscriptions for some online services.

Last Month, EA released its first quarter 2012 results, which were worse than the Zacks Consensus Estimate. Despite a weak first quarter, management remained optimistic regarding its outlook and believes that EA will surpass its guidance based on the upcoming Star Wars game and incremental revenue from the acquisition of PopCap Games.

Recommendation

We believe EA has a strong product pipeline for fiscal 2012 and beyond, which will drive top-line growth going forward. We believe that the high quality titles, impressive product line, increasing exposure to online and social games and diversification of portfolio guarantee market share gains over the long term.

However, interest expense will weigh on the company’s profitability due to the recent issuance of debt related to the PopCap Games acquisition. This, along with competition from Activision Blizzard Inc. and Take-Two Interactive Software Inc. (TTWO) is the primary headwind going forward.

We have a Neutral recommendation on Electronic Arts over the long term (for the next 6 to 12 months). Currently, Electronic Arts has a Zacks #2 Rank, which implies a Hold rating in the short term.

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