I've been thinking about these rumors for some time and while big and scary it just didn't make sense to me. This was confirmed when I spoke with Michale Pachter who ended up having the same view of it.

If Microsoft buys a game publisher, it's likely that their intent would be to make games only for the 360 and PC. Around half of EA's business is generated on other platforms. So if Microsoft bought EA, they would be buying only half of EA--the part that makes its money on the 360--and would be abandoning the rest of EA.

-Michael Pachter, Wedbush Morgan Securities

In a nutshell, there would be no more sports games for the PS3 or the Wii from EA. That is really where the company excels aside from other hits like the Skate and Burnout Series. So that would mean Microsoft would pay a whole hell of a lot of money for a small percentage of the sales. Effectively this would make the purchase price some magnitude more as it would take far longer to recoup the cost than if they were to continue on with business as usual.

Also, it would completely crush the sport video game market. There would no longer be competition. It would probably come down to 2K Games making sports titles for the Wii and the Playstation 3 and MS making sports titles for their platforms.

If you look at the current video game giants landscape there are only a few - THQ, Ubisoft, EA and ActiBlizzendi (Activision, Blizzard, Vivendi).  Yes, Sony and Nintendo are large, but they makes games for their own platforms, same with Microsoft.

Any one of them consuming, or being consumed by another is a far fetched idea. We're talking Billions of dollars involved in each one of them. Some may argue that other companies should be included in the list but none of them stand up to the size of these. These are the dinosaurs of the video game industry, the massive behemoths that while slow to make changes normally, still manage to lead the way.

Myself, Michael Pachter and several others believe that the Microsoft EA deal is nonsense but stranger things have happened. What would be more likely in my mind would be for one of the larger entertainment companies to tender a bid, a company that is not tied to specific hardware in the games industry and does not have a large game presence already. Think massive media companies ruled by the likes of Murdoch, Branson, Turner...these are the ones most likely to be a buyer in the grand scheme of things.