With the release of GTA4, I looked at the EA bid for Take Two again.

It’s still a numbers game.

Literally.

EA needs to grow. It’s stock has been stalled for the past few years (forget for a minute that company execs have heavy stock option components to their compensation).

EA wants to acquire Take Two’s revenue (about $1bn) and have that revenue show up in EA finanicals.

Since EA has a Forward P/E of approx 30 while Take Two’s is approx 16, EA wins big time with an extra 900mm to 1bn in revenue run through it’s financial ratios.

Is Take Two worth 2 billion? Sure, more too, esp given EA’s ratios.

If EA can capture the 1 billion in revenue this year and get the huge upswing in it’s stock price, I think it’s worth more than 2 billion.

Even if Take Two’s revenues drop in 1/2 after this year, EA will be paid back in 3 years rather than 2.

The other hidden factors to consider. First are the gains from acquiring the IP from Take Two.

EA does amazingly well at exploiting IP it acquires – at least for the first few years – so there is more revenue to be had, even when sales of GTA4 drop off.

Second is the shift in sports games landscape once EA Sports and 2k Sports are brought together under one roof.

$2bn is looking like a bargin for EA.

I think Take Two knows it.

If EA doesn’t get the additional $1bn in revenue from acquiring Take Two…one wonders where it will come from…

Activision is too big now…..anyone else thinking “THQ”?