Electronic Arts Says Profit Up 32% but Issues Warning
Electronic Arts Inc. said Thursday that its fiscal first-quarter profit rose 32% but warned that sales during the holiday season would be flat.
EA, the world’s largest video game publisher, takes in about half its revenue for the year during the October-December period. But Chief Financial Officer Warren Jenson told analysts in a conference call that sales would be even with the nearly $1.5 billion the company took in during the holiday quarter last year.
On top of that, EA rivals plan to release some highly anticipated titles at the end of the year, including “Halo 2” from Microsoft Corp., “Half-Life 2” from Vivendi Universal Games Inc. and “Grand Theft Auto: San Andreas” from Take-Two Interactive Software Inc.
Investors reacted by driving the stock down nearly 3% in after-hours trading. EA shares, which fell 24 cents to $52.65 in regular Nasdaq trading, dropped to $51.20 after the earnings report.
“If their revenues are flat and if the industry revenue goes up, then do the math -- someone is growing and they are not,” said Michael Pachter, a video game analyst with Wedbush Morgan Securities in Los Angeles. “This is going to be the first Christmas in my memory that EA will fail to gain market share.”
In the spring quarter, EA’s net income climbed to $24.2 million, or 8 cents a share, from $18.4 million, or 6 cents, a year earlier. Quarterly sales were $432 million, up 22% from $353 million last year.
Jenson said EA boosted its quarterly research and development expenditures 43% to $131 million, and the Redwood City, Calif., company plans to continue spending to cultivate technologies and bring more game development in-house.
EA is already facing a new threat -- a partnership between Take-Two Interactive and Sega Corp. Their first title, “ESPN NFL 2K5,” carries a price tag of $19.95. EA’s top sports games, including “Madden NFL Football,” go for about $50.
Bloomberg News was used in compiling this report.
