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The total cost of the deal comes to a mind-boggling $860 million for the 800-person development entity.
Sterne Agee's Arvind Bhatia expressed some concern over that high price tag, although he reasons that the investment just might pay off.
"We really like EA's acquisition of BioWare/Pandemic, but the price paid ($860 million) on surface seems high to us-more than $1 million per developer," he said in an investor note Friday. "That being said, if EA can generate mid-teens ROI or higher (as per its plan), the acquisition should be nicely accretive and worth the price. We may have to wait a few years to find out, though."
Bhatia also said that in light of Disney's recent $350 million acquisition of Club Penguin makes the BioWare/Pandemic deal appear more reasonable.
On Thursday, EA CFO Warren Jenson said of the deal, "We're very excited about the revenue potential. We see that in both '09 and '10 to be in excess of $300 million."
In a separate note, Colin Sebastian with Lazard Capital Markets wrote, "Although the price tag is significant, we note that the acquisition provides EA with ~800 additional game developers. Also, we believe the addition of BioWare/Pandemic provides increasing visibility to peak earnings expectations for EA in the new cycle."
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