Electronic Arts 2008 Annual Report Download - page 94

Acquisitions, investments and other strategic transactions could result in operating difficulties, dilution
to our investors and other negative consequences.
We have engaged in, evaluated, and expect to continue to engage in and evaluate, a wide array of potential
strategic transactions, including (i) acquisitions of companies, businesses, intellectual properties, and other
assets, (ii) minority investments in strategic partners, and (iii) investments in new interactive entertainment
businesses (for example, online and mobile games). Any of these strategic transactions could be material to
our financial condition and results of operations. Although we regularly search for opportunities to engage in
strategic transactions, we may not be successful in identifying suitable opportunities. We may not be able to
consummate potential acquisitions or investments or an acquisition or investment we do consummate may not
enhance our business or may decrease rather than increase our earnings. The process of acquiring and
integrating a company or business, or successfully exploiting acquired intellectual property or other assets,
could divert a significant amount of resources as well as our management’s time and focus and may create
unforeseen operating difficulties and expenditures, particularly for a large acquisition. Additional risks and
variations of the foregoing risks we face include:
• The need to implement or remediate controls, procedures and policies appropriate for a public company
in an acquired company that, prior to the acquisition, lacked these controls, procedures and policies,
• Cultural challenges associated with integrating employees from an acquired company or business into
our organization,
• Retaining key employees and maintaining the key business and customer relationships of the businesses
we acquire,
• The need to integrate an acquired company’s accounting, management information, human resource and
other administrative systems to permit effective management and timely reporting,
• The possibility that we will not discover important facts during due diligence that could have a material
adverse impact on the value of the businesses we acquire, and
• Potential impairment charges incurred to write down the carrying amount of intangible assets generated
as a result of an acquisition,
• Litigation or other claims in connection with, or inheritance of claims or litigation risks as a result of,
an acquisition, including claims from terminated employees, customers or other third parties,
• Significant accounting charges resulting from the completion and integration of a sizeable acquisition
and increased capital expenditures,
• Significant acquisition-related accounting adjustments, particularly relating to an acquired company’s
deferred revenue, that may cause reported revenue and profits of the combined company to be lower
than the sum of their stand-alone revenue and profits,
• The possibility that the combined company would not achieve the expected benefits, including any
anticipated operating and product synergies, of the acquisition as quickly as anticipated,
• The possibility that the costs of, or operational difficulties arising from, an acquisition would be greater
than anticipated,
• To the extent that we engage in strategic transactions outside of the United States, we face additional
risks, including risks related to integration of operations across different cultures and languages,
currency risks and the particular economic, political and regulatory risks associated with specific
countries, and
• The possibility that a change of control of a company we acquire triggers a termination of contractual
or intellectual property rights important to the operation of its business.
Future acquisitions and investments could also involve the issuance of our equity and equity-linked securities
(potentially diluting our existing stockholders), the incurrence of debt, contingent liabilities or amortization
18