Electronic Arts Tops Forecasts, Raises Outlook
Top video game publisher Electronic Arts posted a quarterly loss but still topped estimates on strong sales of such titles as "FIFA 08" soccer and games for Nintendo's popular Wii console.
The company set a holiday-quarter sales forecast ahead of analyst expectations, raised its full-year revenue outlook, and said it had halted a slide in market share.
Shares of Redwood City-based EA , the world's largest independent video game publisher, rose more than 3 percent Friday.
EA posted a net loss of $195 million, or 62 cents per share, for its second quarter ended Sept. 30, compared with a profit of $22 million, or 7 cents a share, a year earlier.
Excluding special items, EA showed a profit of 27 cents per share, beating the average Wall Street target of 20 cents, according to Reuters Estimates.
Net revenue was $640 million, down 18 percent from $784 million. Including deferred revenue that will be recognized in future quarters, total revenue rose 19 percent to $936 million, topping the average Wall Street target of $896 million.
The company, whose other major franchises include "Madden NFL," "The Sims," "Need for Speed" and "Burnout," said it was benefiting from strong sales of games for Nintendo's Wii, a machine it had initially overlooked in favor of Sony's PlayStation 3.
"They've kind of crossed the divide here, and really started to get sales from next-gen consoles, especially the Wii. That's incredibly important," said Mike Hickey, an analyst with Janco Partners.
EA said, after Nintendo itself, it was the biggest publisher for the Wii, which has been the fastest-selling console this year due to its low price and emphasis on games that appeal to a broad audience.
"Their ability to get on that platform and get sales from it is a strong positive," Hickey said.
Executives voiced optimism over new titles, such as "The Simpsons Game," "Need for Speed Prostreet" and "Rock Band". It expects them to be big sellers in the holiday season, which is the most profitable time of year for the industry.
EA said it expected a profit of 75 cents to 95 cents per share for its third fiscal quarter, which covers the holidays. The figure excludes the impact of deferred revenue and other items but includes 5 cents per share related to EA's purchase last month of two game studios for up to $855 million.
EA raised its full-year revenue forecast by $150 million to between $3.35 billion and $3.65 billion, and said the third quarter would be between $1.63 billion and $1.8 billion.
Wall Street had been looking for third-quarter adjusted profit of 94 cents per share on revenue of $1.61 billion.
EA, which has been reorganizing under a plan set by its new chief executive, John Riccitiello, said it would close a facility in Chertsey, England, resulting in charges of up to $110 million. The closing will help save up to $30 million a year.
Riccitiello said EA's market-share slide has come to a halt and that it would hold 20 percent of the game market in Western Europe and North America, down from 22 percent in 2006.
"I'm pretty pleased to tell you that the dismal share performance we had ... is largely behind us," Riccitiello told a conference call. "The decline is in the past. We're holding our own in Q3 and Q4."
Evan Wilson, an analyst with Pacific Crest Securities, said he was disappointed in EA's forecasts and restructuring plan, which was smaller than many expected.
"The Street has been up in arms over the potential for Electronic Arts to restructure and drive huge earnings growth because of it," said Wilson.
EA shares have risen nearly 17 percent so far this year, compared to a gain of 34 percent for rival Activision. EA shares trade at 53 times expected fiscal 2009 profit, compared to 33 times for Activision shares.