Electronic Arts Reports Expected Loss, Reduces Outlook

Game publisher and developer Electronic Arts has announced its financial results for the the fiscal first quarter ended June 30, 2005, revealing net revenue of $365 million, down 16 percent compared with $432 million for the prior year, and a net loss of $58 million, compared to net income of $24 million in the same period the year before. However, the company actually beat average analysts' estimates for the quarter, which was an expected quiet one for the company. Sales in the quarter were driven by Medal of Honor European Assault and particularly Battlefield 2, with each selling one million copies in the quarter - in fact, Battlefield 2 took just two weeks to reach that target. In addition, Batman Begins, FIFA Street, MVP Baseball 2005 and Need for Speed Underground 2 all sold through 500 thousand copies in the quarter. In another highlight, the company revealed it has 26 percent revenue share for game software on the PSP in North America since launch, and pointed to its mobile phone game expansion as another important growth area. But it was in looking forward that the company stumbled a little, revealing a reduced fiscal outlook for between $3.3 and $3.4 billion in revenue for the fiscal year, down from $3.4 billion to $3.5 billion. The specific reason for this is the previously-known movement of major multi-format franchise title The Godfather into 2006, CFO Warren Jenson indicated in remarks to Reuters. Although the current-generation console versions of The Godfather may appear in the first quarter of 2006 (which is the last quarter of the fiscal year), the next-generation versions will appear later next year, an announcement that has already affected EA's share price. Following the results, anticipation of which had already pushed EA's share price around 5% lower for the day to $59.00, the company's shares lost an additional 3% to $57.10 in after-hours trading due to the depressed outlook. However, with profits of $504 million on revenue of $3.13 billion for the 2004 fiscal year, and a still intelligently rounded portfolio in terms of proven franchise titles, licenses, and increased interest in original IP, the game industry's giant is by no means in significant trouble.