Electronic Arts 2006 Annual Report Download - page 156

Ñscal 2006, we acquired, through open market purchases at an average price of SEK 63.07, an additional
1,071,152 shares of Class A common stock, representing approximately 10 percent of the outstanding
Class A common stock of DICE. Accordingly, on a cumulative basis as of March 31, 2006 and 2005 we
owned approximately 73 percent and 63 percent, respectively, of DICE on an undiluted basis (excluding
the warrant discussed above). As a result, we included the assets, liabilities and results of operations of
DICE in our Consolidated Financial Statements since January 27, 2005. The 27 percent and 37 percent of
DICE stock that we did not own was reÖected as minority interest on our Consolidated Balance Sheets as
of March 31, 2006 and 2005, respectively, and our Consolidated Statements of Operations for the years
ended March 31, 2006 and 2005, respectively.
In March 2006, we signed an agreement to fully merge DICE into EA, which will allow DICE to become
a fully integrated studio. We will pay SEK 67.50 per share in cash to DICE shareholders at the time of
the merger. The merger is subject to customary closing conditions, including regulatory approvals, and is
expected to close during the second quarter of Ñscal 2007. The preliminary purchase price allocation,
including the allocation of goodwill has been and will continue to be updated as additional information
becomes available.
Except for acquired-in-process technology, the acquired Ñnite-lived intangible assets are being amortized
on a straight-line basis over estimated lives ranging from one to four years. The acquired in-process
technology was expensed in our Consolidated Statement of Operations upon consummation of the
acquisition, and in each period, we increased our ownership percentage.
Square Co., Ltd.
In May 1998, we completed the formation of two joint ventures in North America and Japan with Square
Co., Ltd. (""Square''), a leading developer and publisher of entertainment software in Japan. In North
America, the companies formed Square Electronic Arts, LLC (""Square EA''), which had exclusive
publishing rights in North America for future interactive entertainment titles created by Square.
Additionally, we had the exclusive right to distribute in North America products published by this joint
venture. We contributed $3 million and owned a 30 percent minority interest in this joint venture while
Square owned 70 percent. This joint venture was accounted for under the equity method. The joint venture
agreements with Square expired as of March 31, 2003. Our distribution of Square products in North
America terminated on June 30, 2003. On May 30, 2003, Square acquired our 30 percent ownership
interest in the joint venture for $8 million and the investment was removed from our Consolidated Balance
Sheets.
In Japan, the companies established Electronic Arts Square K.K. (""EA Square KK'') in 1998, which
localized and published in Japan a selection of EA's properties originally created in North America and
Europe, as well as developed and published original video games in Japan. We contributed cash and had a
70 percent majority ownership interest, while Square contributed cash and owned 30 percent. Accordingly,
the assets, liabilities and results of operations for EA Square KK were included in our Consolidated
Balance Sheets and Consolidated Statements of Operations since June 1, 1998, the date of formation.
In May 2003, we acquired Square's 30 percent ownership interest in EA Square KK for approximately
$3 million in cash. As a result of the acquisition, EA Square KK became our wholly-owned subsidiary and
was renamed Electronic Arts K.K. The acquisition was accounted for as a step acquisition purchase and
the excess purchase price over fair value of the net tangible assets acquired, $1 million, was allocated to
goodwill.
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