STOCKREPORTS		 Electronic Arts Inc. Nasdaq Symbol ERTS
In S&P MidCap 400
19-JUL-97 Industry:
Computer (Software & Services)		 Summary: Electronic Arts produces entertainment software for CD-ROM-based platforms, including IBM PCs and compatibles, as well as Sega Genesis and Super Nintendo Entertainment systems.

Recent Price 33.75
52 Wk Range 37.88 - 20.13		 Yield Nil
12-Mo. P/E 35.2

Quantitative Evaluation:
Outlook (1 Lowest - 5 Highest)
5-
Fair Value
43.80
Risk
MEDIUM
Earn/Div Rank
B+
Technical Evaluation:
BULLISH since 05/97
Rel. Strength Rank (1 Lowest - 99 Highest)
62
Insider Activity
Neutral

Overview 12-MAY-97

Revenues should rise in the 20% range in FY 98 (Mar.), as strong sales of CD-ROM- based products, spurred by increased numbers of PCs in the home, and demand for software tailored for the new 32-bit dedicated entertainment systems made by Sony and Sega, as well as Nintendo's new 64-bit entertainment system, outweigh sluggish sales of cartridge products for the 16-bit Sega Genesis and Super Nintendo entertainment systems. International markets are expected to remain particularly strong. The life cycle of entertainment software is short, typically six to 18 months; with about 75% of annual revenues derived from the sale of new products, the continued introduction of new software offerings (63 were introduced in FY 97) is encouraging. Margins are expected to widen, on the higher volume, a more favorable product mix, and controlled spending levels.

Valuation 12-MAY-97

The stock rebounded from its recent lows, on evidence of a successful transition to the new generation of entertainment systems and PC-CD products. The shares had been weak on fears that the high R&D costs required to develop the more sophisticated and graphics-intensive entertainment software programs for the new hardware platforms, could penalize earnings. ERTS is maintaining and building on its leadership position in the growing entertainment software market, aided by a growing PC-CD segment and strength in the new dedicated entertainment systems, including the Sony Playstation, Sega Saturn and the Nintendo 64. The shares, which are selling at about 24 times our FY 98 estimate, are expected to outperform the market over the next 12 months.

Key Stock Statistics

S&P EPS Est. 1998 1.25
P/E on S&P Est. 1998 27.0
Dividend Rate/Share Nil
Shs. outstg. (M) 53.9
Avg. daily vol. (M) 0.745
Tang. Bk. Value/Share 7.05
Beta 1.75
Shareholders 2,100
Market cap. (B) $ 1.8
Inst. holdings 87%
Value of $10,000 invested 5 years ago:$ 35,686

Fiscal Year Ending Mar. 31

Revenue (Million $)
1997 1996 1995 1994 1993 1992
Q1 80.63 80.03 74.24 79.50 50.01 24.60
Q2 129.3 93.66 86.29 82.09 54.60 33.00
Q3 271.1 239.7 216.6 149.5 107.1 59.10
Q4 143.8 117.3 108.1 107.2 86.58 45.40
Year 624.8 531.9 493.4 418.3 298.4 162.1

Earning Per Share ($)
1997 1996 1995 1994 1993 1992
Q1 Nil 0.02 0.24 0.15 0.10 0.03
Q2 0.11 0.06 0.14 0.16 0.11 0.07
Q3 0.66 0.54 0.48 0.36 0.25 0.15
Q4 0.19 0.14 0.24 0.23 0.17 0.10
Year 0.96 0.75 1.07 0.90 0.65 0.36

Dividend Data: No cash dividends have been paid. Two-for-one stock splits were effected in 1992 and 1993.

Business Summary 12-MAY-97

Electronic Arts Inc. creates, markets and distributes interactive entertainment software for a variety of platforms, including the Sega Genesis and Super Nintendo Entertainment systems and CD-ROM-based systems, including IBM PCs and compatibles and 32-bit platforms such as the Sony Playstation, Sega Saturn and 3DO entertainment system. Revenues by hardware type in recent fiscal years (Mar.) were:

FY 96 FY 95
Sega Genesis 26% 43%
Super Nintendo 12% 14%
PC CD 26% 15%
Other CD-ROM 15% 6%
Other 21% 22%

At March 31, 1996, the company marketed approximately 120 titles it had created and distributed over 100 titles developed by other software publishers under its Affiliated Label program. Products are distributed through a direct sales force in the U.S., and primarily through third-party distributors in Europe and Asia, to more than 50,000 retail locations worldwide.

In FY 96, international markets accounted for 42% of revenue, up from 32% in FY 95.

Through FY 96 year-end, each of 79 titles developed by ERTS had generated net revenues exceeding $5,000,000. Popular games include "Madden Football," "NBA Live," "FIFA Soccer," "PGA Tour Golf," "NHL Hockey," "College Football," "Road Rash" and "Wing Commander."

In the FY 95 third quarter, ERTS and Capital Cities/ABC, Inc. formed a joint venture to develop and publish interactive software for personal computers and video game machines; each company holds a 50% interest in the venture.

In the first quarter of FY 95, the company recorded a $10,000,000 payment from Broderbund Software ($8,600,000, net of costs incurred; $0.12 a share, after taxes) in connection with the termination of a merger agreement between the company and Broderbund.

Important Developments

May '97 In the fourth quarter of FY 97, revenues derived in North American markets rose 21%, year to year, and accounted for 45% of sales; international markets rose 24%, providing 55% of sales.
May '97 CD-ROM products accounted for 64% of revenues in FY 97 (up from 41% in FY 96); 16-bit video game cartridges contributed 14% (38%).

Capitalization

Long Term Debt: None (3/97).

Per Share Data ($)
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
Tangible Bk. Val. NA 6.11 4.66 3.61 2.37 1.55 1.14 0.86 0.42 0.26
Cash Flow NA 1.04 1.27 1.05 0.73 0.40 0.26 0.20 0.17 0.07
Earnings 0.96 0.75 1.07 0.90 0.65 0.36 0.23 0.17 0.13 0.04
Dividends Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil
Payout Ratio Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil
Cal. Yrs. 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
Prices - High 39 7/8 42 1/4 33 1/2 42 21 3/4 9 5/8 4 1/4 2 3/8 NA NA
- Low 21 1/8 15 3/8 12 3/4 19 3/4 9 1/8 2 1/4 1 9/16 1 3/4 NA NA
P/E Ratio - High 42 56 31 47 33 26 19 14 NA NA
- Low 22 20 12 22 14 6 7 10 NA NA

Income Statement Analysis (Million $)
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
Revs. NA 532 493 418 298 162 102 72.0 63.0 50.0
Oper. Inc. NA 69.4 74.2 68.4 45.2 24.6 14.1 10.2 6.8 4.0
Depr. NA 15.9 9.3 7.9 4.0 1.7 1.5 1.2 1.5 0.9
Int. Exp. NA Nil 0.1 0.1 0.1 0.2 0.0 0.1 0.4 0.0
Pretax Inc. NA 59.6 78.1 64.3 43.7 24.3 13.8 9.6 5.2 3.2
Eff. Tax Rate NA 32% 32% 30% 31% 36% 34% 37% 22% 60%
Net Inc. NA 40.5 55.7 44.7 30.9 15.7 9.1 6.0 4.0 1.4

Balance Sheet & Other Fin. Data (Million $)
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
Cash NA 186 185 142 98.0 56.9 27.6 22.0 3.1 0.6
Curr. Assets NA 300 272 234 153 91.2 53.7 39.8 19.1 16.6
Total Assets NA 424 341 274 181 101 63.0 47.0 26.0 23.0
Curr. Liab. NA 101 103 98.0 67.7 35.9 19.1 14.0 9.1 11.6
LT Debt NA Nil Nil Nil Nil Nil Nil Nil 0.2 0.2
Common Eqty. NA 322 237 172 111 65.2 43.8 32.6 16.2 9.9
Total Cap. NA 323 238 176 114 65.2 43.9 32.7 16.4 10.2
Cap. Exp. NA 56.8 16.5 14.0 17.8 3.2 1.6 0.8 2.7 2.9
Cash Flow NA 56.3 65.1 52.6 34.9 17.4 10.6 7.2 5.5 2.1

Curr. Ratio NA 3.0 2.6 2.4 2.3 2.5 2.8 2.8 2.1 1.4
% LT Debt of Cap. NA Nil Nil Nil Nil Nil Nil Nil 0.9 1.7
% Net Inc.of Revs. NA 7.7 11.3 10.7 10.3 9.7 9.0 8.3 6.3 2.6
% Ret. on Assets NA 10.6 17.6 19.4 21.1 18.4 16.5 16.6 16.4 7.2
% Ret. on Equity NA 14.5 26.5 31.3 33.8 27.7 23.7 24.8 30.7 14.2

Data as orig. reptd.; bef. results of disc. opers. and/or spec. items. Per share data adj. for stk. divs. as of ex-div. date. E-Estimated. NA-Not Available. NM-Not Meaningful. NR-Not Ranked.

Office--1450 Fashion Island Blvd., San Mateo, CA 94404. Tel--(415) 571-7171. Chrmn, Pres & CEO--L. F. Probst lll. SVP & CFO--E. S. McKee Jr. Secy--G. K. Davidson. Dirs--R. M. Asher, W. J. Byron, D. H. Case lll, R. Cohn, T. Mott, L. F. Probst lll. Transfer Agent & Registrar--First Interstate Bank, SF. Incorporated--in California in 1982; reincorporated in Delaware in 1991. Empl-- 1,077. S&P Analyst: Peter C. Wood, CFA


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