Electronic Arts-Broderbund Merger Is Off : Computers: Collapse is indicative of confusion over how interactive software companies should be valued.

In the eeny-meeny-miny-mo game of collapsing media mergers, the Electronic Arts-Broderbund Software deal is today’s “it.”

The two interactive software developers, based in San Mateo and Novato, respectively, had agreed in November to merge in a stock swap then valued at $400 million. But, as if playing copycat with their bigger media siblings, they called off the deal Tuesday, citing recent stock price declines and a disagreement over their relative worth.

The disintegration of what would have been the largest merger so far in the home multimedia software industry comes in the wake of several canceled alliances between cable and phone companies, most notably Bell Atlantic Corp. and Tele-Communications Inc. And this week Viacom Inc.’s planned merger with Blockbuster Entertainment Corp. appears to have unraveled.

Those deals went sour in part because investors once hyped on the vision of the futuristic so-called information superhighway sent stock prices of many cable, software and media firms tumbling after realizing that it was more futuristic than they had at first thought.

Electronic Arts, the leading producer of interactive games such as “John Madden Football,” was to acquire Broderbund in exchange for shares of Electronic Arts stock, which was trading as high as $38 last fall.

But Electronic Arts shares have since slumped, falling $1.69 on Tuesday to close at $20.06 in Nasdaq trading. The decline, due largely to concerns over how the company will handle the transition from cartridge-based games to next-generation CD-ROM software, meant that the stock being offered for Broderbund was worth perhaps $50 million less than when the deal was struck.

Broderbund, which dominates the educational software market with such titles as “Where in the World is Carmen Sandiego?” recently won the electronic rights to the “Dr. Seuss” books.

With a shareholder’s meeting set for next week, Broderbund’s board told Electronic Arts on Friday that it wanted out of the deal. A revised offer put together by Electronics Arts executives over the weekend was also rejected. Broderbund agreed to pay Electronic Arts $10 million to terminate the arrangement. Its shares jumped $6.50 to $41.25 on Nasdaq.

The deal’s demise reflects several factors, including a generally lower stock market. But most of all, the collapse reflects confusion over how to value interactive software companies, the prices of which were bid wildly higher by bigger media companies.

Executives knowledgeable about the Broderbund-Electronic Arts deal said a key reason for Broderbund’s withdrawal was the $462-million price tag British media giant Pearson agreed to pay last month for Broderbund’s smaller and less esteemed competitor Software Toolworks--nearly four times the company’s annual sales.

But analysts said the consolidation of the industry will continue as companies realize the value of size in getting coveted shelf space.

“This isn’t a sign of any inherent problems in the industry,” said Keith Benjamin, who follows interactive software for Robertson Stephens & Co., a San Francisco investment bank. “It’s a classic example of two companies disagreeing on price.”