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EA's Maxis Closure Is 'Interesting' But 'Irrelevant'

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EA's Maxis Closure Is 'Interesting' But 'Irrelevant'

Electronic Arts Inc. (NASDAQ: EA) announced this week that it will close Maxis Emeryville, the creator of "SimCity" and "The Sims."

EA purchased the company more than a decade ago and gained control of one of the biggest PC franchises of all time.

"Keep in mind, we've seen sort of a big change over the last couple of years on the executive side," Benchmark analyst Michael Hickey told Benzinga. "I think when you look back at [former EA CEO] John Riccitiello's tenure, he was really trying to build a digital profile, which they've successfully done now. In doing so, I think they acquired a lot of assets that didn't have the long-term value they expected."

Hickey noted that studio closures are not exclusive to EA. Activision Blizzard, Inc. (NASDAQ: ATVI), Take-Two Interactive Software, Inc. (NASDAQ: TTWO) and Walt Disney Co (NYSE: DIS) are among the firms that have closed game divisions within a few years of their acquisition.

"Closing Maxis is interesting," Hickey added. "It's a legacy studio. You look back on [SimCity creator and Maxis co-founder] Will Wright. Of course, he's been gone for years now. Clearly what they thought they had there was no longer needed, and the IP will be refocused in other studios."

Related Link: Is Electronic Arts Serious About Virtual Reality?

'Hardly A Rash Decision'

Maxis' closure may disappoint some fans, but the firm lasted longer than most of the studios EA has acquired.

"[It's] pretty irrelevant," Wedbush analyst Michael Pachter told Benzinga. "They bought Maxis in the '90s, so it is hardly a rash decision. They're consolidating, and offering jobs to pretty much everyone impacted."

Pachter said that EA will now save money on real estate. He also estimated that EA will trim Maxis' personnel by 20 percent because some of its employees won't relocate.

"Most were offered jobs across the bay in Redwood Shores, so it's not that much of a hardship to relocate," Pachter added. "My guess is that their building lease was expiring, and they decided to close so they didn't have to renew the lease."

Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.

Image credit: Elven*Nicky, Flickr

 

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