EA Posts Decline in Profit, Revenue

Electronic Arts Inc. said Tuesday that revenue and profit fell as a shortage of video game consoles and stiff competition from rival publishers cut into the company’s results for the crucial holiday quarter.

The publisher of the Sims and Madden Football games reported revenue of $1.43 billion in the fiscal third quarter ended Dec. 31, down 3% from $1.48 billion a year ago. Net income fell 4.4% to $375 million, or $1.18 a share, from $392 million, or $1.26, in the same quarter a year earlier.

“We held our own in a highly competitive fourth quarter and year,” company Chief Financial Officer Warren Jenson said during a conference call with analysts.

Analysts polled by Thomson First Call had expected Redwood City, Calif.-based EA to post net income of $370.8 million, or $1.18 a share, on $1.4 billion in sales. Many had cut their forecasts last year after the company voiced concerns about a shortage of PlayStation 2, Xbox and Nintendo Dual Screen consoles.

For its fiscal year ending March 31, EA projected sales between $3.275 billion and $3.325 billion, up from $2.957 billion for fiscal 2004. It also forecast earnings of $1.82 to $1.87 a share compared with $1.87 in 2004.

EA shares, which fell 13 cents to $57.54 on Nasdaq, gained $2.46 in after-hours trading after the earnings release.

Even though EA had four of the top 10 selling titles in December in the U.S., analysts said sales of EA games were hindered by the release of two blockbuster titles from rival publishers -- “Halo 2” from Microsoft Corp. and “Grand Theft Auto: San Andreas” from Take-Two Interactive Software Inc.

“Some of their games just underperformed,” said P.J. McNealy, an analyst with American Technology Research in San Francisco.

Jenson hinted that this year’s earnings would be under pressure as the company made investments to streamline game development and prepare for the next generation of consoles, expected to debut sometime next year. The company recently bought a 20% stake in UbiSoft Entertainment and completed acquisitions of game makers Criterion Software and Digital Illusions.

With $2.6 billion in cash, EA is also expected to make further acquisitions, Jenson said.

“We do believe there will be opportunity, and we expect to be active participants,” he said.