Electronic Arts 2008 Annual Report Download - page 149

Asset-backed securities are separately disclosed as they are not due at a single maturity date. Our portfolio
only includes asset-backed securities that have weighted-average maturities of three years or less. As of
March 31, 2008, the amortized cost and fair value of asset-backed securities with a weighted average maturity
less than 1 year was $55 million and $56 million, respectively, while the amortized cost and fair value of
asset-backed securities with a weighted average maturity of 1 to 2 years was $8 million. There were no asset-
backed securities with a weighted average maturity of 2 to 3 years.
(c) Marketable Equity Securities
Marketable equity securities consisted of the following (in millions):
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
As of March 31, 2008 ................................... $232 $501 $ (4) $729
As of March 31, 2007 ................................... $ 91 $250 $ — $341
Our investments in marketable equity securities consist of investments in common stock of publicly traded
companies.
In May 2007, we entered into a licensing agreement with and made a strategic equity investment in The9
Limited, a leading online game operator in China. We purchased approximately 15 percent of the outstanding
common shares (representing 15 percent of the voting rights at that time) of The9 for approximately
$167 million. Our agreement with The9 requires us to hold these common shares until May 2008. The
licensing agreement gives The9 exclusive publishing rights for EA SPORTS
TM
FIFA Online in mainland China.
In April 2007, we expanded our commercial agreements with, and made strategic equity investments in,
Neowiz Corporation and a related online gaming company, Neowiz Games. We refer to Neowiz Corporation
and Neowiz Games collectively as “Neowiz”. Based in Korea, Neowiz is an online media and gaming
company with which we partnered in 2006 to launch EA SPORTS FIFA Online in Korea. We purchased
15 percent of the then-outstanding common shares (representing 15 percent of the voting rights at that time) of
Neowiz Corporation and 15 percent of the outstanding common shares (representing 15 percent of the voting
rights at the time) of Neowiz Games, for approximately $83 million. As discussed below, we also purchased
preferred shares of Neowiz which we classified in other assets on our Consolidated Balance Sheets.
In February 2005, we purchased approximately 19.9 percent of the then-outstanding ordinary shares
(representing approximately 18 percent of the voting rights at the time) of Ubisoft Entertainment (“Ubisoft”)
for $91 million. As of March 31, 2007, we owned approximately 15 percent of the outstanding shares of
Ubisoft (representing approximately 14 percent of the voting rights). As of March 31, 2008, we owned
approximately 15 percent of the outstanding shares of Ubisoft (representing approximately 24 percent of the
voting rights). Our Ubisoft investment is accounted for as available-for-sale under the provisions of SFAS 115,
“Accounting for Certain Investments in Debt and Equity Securities”, as amended, and not under the equity
method of accounting, because we do not have the ability to exercise significant influence over Ubisoft.
During fiscal 2008, we recognized an impairment charge of $81 million with respect to our investment in
The9 and $28 million with respect to our Neowiz common shares. Both The9 and Neowiz are publicly traded
companies and due to various factors, including the extent and duration during which the market price had
been below cost, we concluded the decline in value was other-than-temporary as defined by SFAS No. 115, as
amended. The $109 million impairment is included in losses on strategic investments on our Consolidated
Statements of Operations.
As of March 31, 2008, we had gross unrealized gains of $501 million and gross unrealized losses of $4 million
in our marketable security investments. Based on our review, we do not consider the investments with gross
unrealized losses to be other-than-temporarily impaired as of March 31, 2008. We evaluate our investments for
impairment quarterly. If we conclude that an investment is other-than-temporarily impaired, we will recognize
an impairment charge in income at that time. During fiscal 2007 and 2006, no other-than-temporary
impairment charges were recognized.
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