Electronic Arts 2010 Annual Report Download - page 159

Annual Report
Asset-backed securities are separately disclosed as they are not due at a single maturity date.
Marketable Equity Securities
Our investments in marketable equity securities consist of investments in common stock of publicly traded
companies and are accounted for as available-for-sale securities and are recorded at fair value. Unrealized gains
and losses are recorded as a component of accumulated other comprehensive income in stockholders’ equity, net
of tax, until either the security is sold or we determine that the decline in fair value of a security to a level below
its adjusted cost basis is other-than-temporary. We evaluate our investments for impairment quarterly. If we
conclude that an investment is other-than-temporarily impaired, we recognize an impairment charge at that time
in our Consolidated Statements of Operations.
Marketable equity securities consisted of the following as of March 31, 2010 and March 31, 2009 (in millions):
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
As of March 31, 2010 ..................................... $132 $159 $— $291
As of March 31, 2009 ..................................... $175 $190 $— $365
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. The licensing agreement gives The9 exclusive publishing rights for EA SPORTS™FIFA Online 2in
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 are classified as 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, 2010 and 2009, we owned approximately 15 percent of the outstanding shares of
Ubisoft (representing approximately 13 and 24 percent of the voting rights, respectively) in each year. Although
we held 24 percent of the voting rights of Ubisoft as of March 31, 2009, we did not account for this investment
under the equity method of accounting because we did not have the ability to exercise significant influence over
the investee.
During fiscal years 2010, 2009 and 2008, we recognized impairment charges of $26 million, $27 million and $81
million, respectively, on our investment in The9. During fiscal years 2009 and 2008, we recognized impairment
charges of $30 million and $28 million, respectively, on our Neowiz common shares. We did not recognize any
impairment charges related to our Neowiz common shares for the fiscal year ended March 31, 2010. Due to
various factors, including but not limited to, the extent and duration during which the market price had been
below adjusted cost and our intent to hold certain securities, we concluded the decline in values were other-than-
temporary. In fiscal year 2009, we received a cash dividend of $5 million from The9, offsetting our $27 million
impairment charge. The $26 million, $57 million and $109 million impairments for the fiscal years ended
March 31, 2010, 2009 and 2008, respectively, are included in losses on strategic investments, net, on our
Consolidated Statements of Operations.
During the fiscal year ended March 31, 2010, we received proceeds of $17 million and realized gains and losses
of less than $1 million each, from selling a portion of our investment in The9. We did not sell any of our
marketable equity securities during the fiscal years ended March 31, 2009 and 2008.
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