Electronic Arts posts wider loss, lowers forecast and plans to cut 100 more jobs
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Electronic Arts, the publisher of games such as The Sims and Madden NFL, today posted a deep quarterly loss. It also said it would cut 100 more jobs and close three more facilities than previously announced because holiday sales disappointed.
The Redwood City, Calif., company now plans to slice 1,100 people, or 11% of its workforce, from the payroll this year and shutter a dozen facilities in an effort to save about half a billion dollars a year.
EA lost $641 million, or $2 a share, on sales of $1.65 billion during the crucial Christmas quarter. Much of EA’s fiscal third-quarter losses stemmed from two one-time charges: $368 million related to its wireless games business and $244 million for deferred taxes.
In the earnings release, EA CEO John Riccitiello (pictured at right) said:
Our holiday quarter came in below our expectations, and we have significantly reduced our financial outlook for fiscal 2009, a clear disappointment. We delivered on game quality and innovation in calendar 2008, with 13 titles rated 80 or above -- more than any third-party publisher. We expect to build on this great quality record in the year ahead while delivering more profitability.
EA said it expected to pull in $4.2 billion to $4.25 billion in sales during its current fiscal year ending March 31. It also projected a per-share loss of $3.29 to $3.56.
EA shares gained 64 cents to close at $15.50 before the earnings release but rose more than 4% in after-hours trading.
Updated, 5:15 pm: In an interview, EA Chief Financial Officer Eric Brown clarified the projected savings from the company’s cost cuts. The $500 million in reduced annual spending for EA’s fiscal 2010 would come from the $2.6 billion that the company had previously budgeted. Compared with this fiscal year’s operating budget of $2.25 billion, however, EA would trim $150 million in expenses.
EA said every expense category would be cut back except marketing and advertising, which is expected to increase. To better promote the company’s key franchises, Riccitiello told analysts during a conference call that EA would delay releasing The Sims 3, Godfather 2 and Dragon Age. Instead of coming out in this this fiscal year, which ends March 31, they’ll hit stores in the next.
-- Alex Pham