Electronic Arts Falls After Forecast Trails Estimates (Update1)
February 08, 2010, 8:13 PM EST(Adds analyst’s comment in fourth paragraph)
By Adam Satariano
Feb. 8 (Bloomberg) -- Electronic Arts Inc., the world’s second-largest video-game publisher, tumbled in extended trading after its full-year forecast trailed some analysts’ estimates.
Fiscal 2011 profit, excluding some items, will be 50 cents a share to 70 cents a share, the Redwood City, California-based company said today in a statement. That’s less than the $1 a share projection of Michael Pachter, an analyst at Wedbush Morgan Securities in Los Angeles.
The maker of “Madden NFL,” which has cut more than 2,500 jobs since 2008, missed its last two annual profit targets after disappointing holiday sales. Chief Executive Officer John Riccitiello aims to boost profit by releasing fewer titles, cutting costs and expanding online and mobile offerings.
“The cost cuts are great, and they got rid of all the losing games, so why aren’t they making more money?” Pachter said in an interview. “The earnings growth remains elusive.”
Electronic Arts fell $1.48, or 8.5 percent, to $16.01 at 5:32 p.m. after the announcement. The shares, which gained 11 percent last year, rose 23 cents to $17.49 in regular Nasdaq Stock Market trading.
Sales for 2011, including changes in deferred net revenue, will be $3.5 billion to $3.7 billion. Excluding those items, sales will be $3.65 billion to $3.9 billion, missing Pachter’s $4.5 billion estimate.
‘Need for Speed’
The company projects a 3 percent drop in industry-wide sales this year, Chief Financial Officer Eric Brown said in an interview.
“We’ve taken a measured view of the sector,” Brown said.
Releases in fiscal 2011 include “FIFA World Cup South Africa” and “Madden NFL 11,” and a return of the “Medal of Honor” and “Need for Speed” franchises. Digital sales, including online and mobile games, will rise about 30 percent to $750 million, Brown said.
The company reported its third-quarter net loss narrowed to $82 million, or 25 cents a share, from a loss of $641 million, or $2 a share, a year earlier. Excluding some items, profit was 33 cents, compared with the 31-cent estimate of 23 analysts surveyed by Bloomberg. Sales fell 23 percent to $1.3 billion.
Riccitiello said last month that fiscal 2010 earnings would be lower than expected because of weak holiday sales. The company expects fourth-quarter profit to be 2 cents to 6 cents a share after releasing new games including “Mass Effect 2.”
“There earnings growth remains elusive,” Pachter said.
Activision Blizzard Inc., the world’s largest video-game publisher, reports fourth-quarter results on Feb. 10.
(Electronic Arts began a conference call at 5 p.m. New York time. To listen, go to investor.ea.com.)
--Editors: James Callan, Rob Golum
To contact the reporter on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net.
To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net.
