What makes the duo stand out is the striking similarity between their business models – both have built their businesses on very strong content base, they have rolled out some of the most popular titles for gaming consoles like Xbox and PlayStation, and they enjoy a strong presence in the smartphone space.
For Electronic Arts, it has been a steady growth ever since its turnaround a few years ago, ending a long-drawn losing streak that was achieved through stringent cost cutting measures and streamlining of the product portfolio.
Now, here’s something that could be a game-changer. It may seem odd, but Electronic Arts stands to benefit from the huge cash it has parked abroad, thanks to the sharp tax cut imposed by the government on foreign earnings.
Electronic Arts stands to benefit from the huge cash it has parked abroad, thanks to the tax cut on foreign earnings
While the fluctuating effective tax rate casts doubts over the actual benefit of the tax reform, investors can look forward to gaining from cash repatriation as the company might use the cash to start a dividend program, thereby becoming the second gaming company after Activision to pay dividend.
The case for dividend is supported by the fact that gaming business is comparatively capital-light and that Electronic Arts has a very low debt. The strides made by the company in generating revenue from digital distribution put it in an advantageous position, considering the massive digital shift the gaming business is currently witnessing.
Shares of Electronic Arts closed Wednesday’s trading at $127.17, up 2.10%. Activision stock gained 0.2% during the day and closed at $74.07.