EA Cuts Forecast for Year

Electronic Arts Inc. on Monday cut its profit and revenue forecast for the year ending March 31 because of what it said was lower-than-expected sales in North America and Europe. The shares fell 13% in after-hours trading.

Electronic Arts, the largest U.S. video game maker, said fiscal 2005 net income would be $1.62 to $1.64 a share, down from an earlier forecast of as much as $1.87. Sales will be as much as $3.13 billion, less than an earlier forecast of as much as $3.33 billion.

Sales of games released for the holiday season, such as “Need for Speed Underground,” were less than expected in the first three months of 2005, Chief Financial Officer Warren C. Jenson said.

The Redwood City, Calif.-based company is also facing mounting competition from game makers such as Take-Two Interactive Software Inc. and Calabasas-based THQ Inc.

The January-March period is Electronic Arts’ fiscal fourth quarter.

“It’s shocking,” said Evan Wilson, an analyst at Pacific Crest Securities in Portland, Ore., who rates Electronic Arts shares “sector perform” and doesn’t own them. “This is going to be one of those events that’s going to be very significant for all companies in the industry.”

Shares of Electronic Arts fell $8.57 to $57.78 in extended trading Monday. The shares, which had risen 7.6% this year, fell 38 cents to $66.35 in regular Nasdaq trading.

“We’re very disappointed,” Jenson said. “Holiday releases underperformed.”

Other game company shares also dropped in extended trading on Nasdaq. Take-Two, the third-largest game company, fell $2.42, or 5.8%, to $39, and Santa Monica-based Activision Inc., the second-largest, fell $1.13, or 4.9%, to $21.86.

Games such as Microsoft Corp.’s “Halo 2” and “Grand Theft Auto,” published by Take-Two, were among the bestselling games during the holidays, said Michael Pachter, an analyst at Wedbush Morgan Securities in Los Angeles. “EA didn’t have anything spectacular,” he said.