Electronic Arts 2009 Annual Report Download - page 94

If our marketing and advertising efforts fail to resonate with our customers, our business and operating
results could be adversely affected.
Our products are marketed worldwide through a diverse spectrum of advertising and promotional programs such
as television and online advertising, printing advertising, retail merchandising, website development and event
sponsorship. Our ability to sell our products and services is dependent in part upon the success of these programs.
If the marketing for our products and services fail to resonate with our customers, particularly during the critical
holiday season or during other key selling periods, or if advertising rates or other media placement costs increase,
these factors could have a material adverse impact on our business and operating results.
Uncertainty and adverse changes in the economy could have a material adverse impact on our business
and operating results.
As a result of the national and global economic downturn, overall consumer spending has declined and retailers
globally have taken a more conservative stance in ordering game inventory. The decrease in discretionary
consumer spending contributed to the decline in the anticipated demand for our products during the 2008 holiday
selling season. Continued economic distress, which may result in a further decrease in demand for our products,
particularly during key product launch windows, could have a material adverse impact on our operating results
and financial condition. Uncertainty and adverse changes in the economy could also increase the risk of material
losses on our investments, increase costs associated with developing and publishing our products, increase the
cost and decrease the availability of sources of financing, and increase our exposure to material losses from bad
debts, any of which could have a material adverse impact on our financial condition and operating results. In
addition, the decline in our market capitalization and our expected financial performance indicated that a
potential impairment of goodwill existed during the third quarter of fiscal year 2009. As a result, we performed
goodwill impairment tests for our reporting units in accordance with Statement of Financial Accounting Standard
(“SFAS”) No. 142, Goodwill and Other Intangible Assets. As a result of the goodwill impairment analysis, we
determined that our EA Mobile reporting unit’s goodwill was impaired. During the fiscal year ended March 31,
2009, we recorded a goodwill impairment charge of $368 million related to our EA Mobile reporting unit. If we
experience further deterioration in our market capitalization or our financial performance, we could be required
to recognize significant impairment charges in future periods.
Our international net revenue is subject to currency fluctuations.
For the fiscal year ended March 31, 2009, international net revenue comprised 43 percent of our total net
revenue. We expect foreign sales to continue to account for a significant portion of our total net revenue. Such
sales may be subject to unexpected regulatory requirements, tariffs and other barriers. Additionally, foreign sales
are primarily made in local currencies, which may fluctuate against the U.S. dollar. In addition, our international
investments and our cash and cash equivalents denominated in foreign currencies are subject to currency
fluctuations. We use foreign currency forward contracts to mitigate some foreign currency risk associated with
foreign currency denominated assets and liabilities (primarily certain intercompany receivables and payables) to
a limited extent and foreign currency option contracts to hedge foreign currency forecasted transactions
(primarily related to a portion of the revenue and expenses denominated in foreign currency generated by our
operational subsidiaries). However, these activities are limited in the protection they provide us from foreign
currency fluctuations and can themselves result in losses. The disruption in the global financial markets has also
impacted many of the financial institutions with which we do business. A sustained decline in the financial
stability of financial institutions as a result of the disruption in the financial markets could negatively impact our
treasury operations, including our ability to secure credit-worthy counterparties for our foreign currency hedging
programs. Accordingly, our results of operations, including our reported net revenue, operating expenses and net
income, and financial condition can be adversely affected by unfavorable foreign currency fluctuations,
especially the Euro, British pound sterling and Canadian dollar.
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