EA Earnings: Looking for Stronger Revenue and Profits

Electronic Arts reports its fiscal third quarter earnings after the bell; Wall Street's eagerly looking for signs of growth following a year when video game software sales declined. The company's expected to report EPS of 57 cents per share, up 72 percent from the year-ago quarter on 7 percent higher revenue of $1.43 billion. Sales of "Madden 11" and "Medal of Honor" along with strong international sales of "FIFA Soccer 11," should help offset difficult comparisons with last year.

Medal of Honor
Medal of Honor

There's no question: digital revenues should soar. Last quarter EA saw a 20 percent increase in year-over-year digital revenues, and this quarter we could see that number top 35 percent, according to Hudson Square Research. In the most recent quarter EA acquired Chillingo, which publishes iPhone and iPad games for $20 million. We will likely see more impact from EA's $400 million November 2009 acquisition of social game maker Playfish.

But MKM Partners analyst Eric Handler warns that the fiscal third quarter is likely to disappoint — he predicts that game sales fell short of expectations in December. But Handler is optimistic about the fiscal fourth quarter-- the one we're in right now. The launch of EA's "Dead Space 2" got off to a strong start. and Tiger Woods PGA 12 was moved into the current quarter and that hadn't been accounted for in prior projections.

On the post-earnings conference call we can expect plenty of questions about a new online Star Wars game, which is one of the company's largest development projects ever. When will it launch and how big does EA think it'll be? This would be a so-called "massive multiplayer online game," similar to Activision Blizzard's "World of Warcraft." These online games are the holy grail for video game developers — they get players hooked and then they charge players a monthly fee. In stark contrast to console games, which require players to make a one-time investment, the massive multiplayer subscriptions are the gift that keep on giving.

Questions? Comments? MediaMoney@cnbc.com