Electronic Arts 2012 Annual Report Download - page 164

Marketable equity securities consisted of the following as of March 31, 2012 and 2011 (in millions):
Adjusted
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
As of March 31, 2012 ..................................... $32 $ 87 $— $119
As of March 31, 2011 ..................................... $32 $129 $— $161
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 then-outstanding common shares (representing 15 percent of the voting rights at the time) of
Neowiz Games, for approximately $83 million. In addition, we purchased preferred shares of Neowiz, which
were classified as other assets on our Consolidated Balance Sheet as of March 31, 2010. During the fourth
quarter of fiscal year 2011, we exercised our option to convert all of the preferred shares to common shares. As
of March 31, 2012 and 2011, we had an adjusted cost basis in our investment in Neowiz of $32 million due to
impairments on the investment recognized in prior years. We did not recognize any impairment charges on our
Neowiz common shares during the fiscal years ended March 31, 2012, 2011 and 2010.
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, we owned approximately 15 percent of the outstanding shares of Ubisoft (representing approximately
13 percent of the voting rights). During the fiscal year ended March 31, 2011, we sold our investment in Ubisoft and
received proceeds of $121 million and realized a gain of $28 million, net of costs to sell. The realized gain is included
in gains (losses) on strategic investments, net, in our Consolidated Statements of Operations.
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. We began selling this investment in fiscal year 2010 and sold the remaining portion in fiscal year 2011.
During the fiscal years ended March 31, 2011 and 2010, we received proceeds of $11 million and $17 million,
respectively, from the sale of this investment and realized losses of $3 million and less than $1 million,
respectively. Due to various factors, including but not limited to, the extent and duration during which the market
prices of these securities had been below adjusted cost and our intent to hold certain securities, we recognized
impairment charges attributed to unrealized losses on our investment in The9 that we concluded were other-than-
temporary in the amount of $2 million and $26 million during the fiscal years ended March 31, 2011 and 2010,
respectively. The realized losses and impairment charges for the fiscal years ended March 31, 2011 and 2010 are
included in gains (losses) on strategic investments, net, in our Consolidated Statements of Operations.
0.75% Convertible Senior Notes Due 2016
The following table summarizes the carrying value and fair value of our 0.75% Convertible Senior Notes due
2016 as of March 31, 2012 (in millions):
As of March 31, 2012
Carrying
Value
Fair
Value
0.75% Convertible Senior Notes due 2016 ........................................ $539 $584
The carrying value of the 0.75% Convertible Senior Notes due 2016 excludes the fair value of the equity
conversion feature, which was classified as equity upon issuance, while the fair value is based on quoted market
prices for the 0.75% Convertible Senior Notes due 2016, which includes the equity conversion feature. The fair
value of the 0.75% Convertible Senior Notes due 2016 is classified as level 2 within the fair value hierarchy. See
Note 11 for additional information related to our 0.75% Convertible Senior Notes due 2016.
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