Matt Martin 09:22 (BST)
15/09/2008

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Concerns over Electronic Arts' ability to retain the key development talent of Rockstar Games may have been one of the deciding factors in the company's decision to pull the plug on the acquisition of Take-Two.

Contracts between developer Rockstar Games and publisher Take-Two are due to expire this February.

That's according to analyst Doug Creutz of Cowen and Company, who also believes personality conflicts, scepticism of future releases from Take-Two and EA's own financial image were also contributing factors in the shock decision.

"Presumably EA decided to walk because it could not justify paying a price in the USD 28-30 range, which we think would have gotten the deal done," said Creutz.

"We think EA's decision to walk was motivated by some combination of the following: a desire to appear fiscally responsible after several years of capital misallocation, concern about EA’s ability to retain the development talent at Rockstar, personality conflicts between the management teams of the two companies, and scepticism about Take-Two's multi-year release lineup.

"The main question mark is the status of Rockstar’s key talent, with their contract due to expire in February 2009," noted the analyst.

Many had considered EA's attempted acquisition of Take-Two to be a done deal, and Creutz believes the decision to walk away puts increased pressure on Electronic Arts to deliver going forward.

"The decision to go it alone puts added pressure on EA to deliver improving fundamental performance. We remain unconvinced that EA can reach its FY11 target of USD 1.5B in non-GAAP operating income," he added.