Electronic Arts Posts 2Q Net Loss

EA Sports provided this image from the video game
EA Sports provided this image from the video game "Madden NFL 08," which was launched in August, 2007. Electronic Arts is expected to release quarterly earnings Thursday, Nov. 1, 2007. (AP Photo/EA Sports) (Anonymous - AP)
The Associated Press
Friday, November 2, 2007; 2:28 AM

SAN JOSE, Calif. -- Video-game software publisher Electronic Arts Inc. swung to a fiscal second-quarter net loss, hurt by an accounting change, but shares climbed 5 percent after the company outlined a promising product lineup and said it expected to see a "great" holiday season.

The company also said Thursday it would shut down one of its development studios in England and trim its work force by about 4 percent, laying off about 350 employees.

"They've made tons of progress," said Michael Pachter, an analyst at Wedbush Morgan Securities. "They appear to have costs under control and revenue growth is solid. They made all the right comments about cost-cutting."

Redwood City-based EA, the world's largest independent video game publisher, has been criticized this year for not investing enough in games for the Nintendo Wii, which has become a runaway best-seller among the three major game consoles.

EA's chief financial officer, Warren Jenson, said the company has worked to change its lineup and will have seven titles for the Wii in time for the holidays, as well as five titles for the popular Nintendo DS gaming handheld _ and more are planned.

"We were late to the Wii, but this year, we plan to launch 10 to 15 games for the Wii and DS," Jenson said in an interview. Currently, EA is the biggest third-party developer for the Wii, he said, but the company knows there is stiff competition in the arena. "So we're still building on that and we know we have a long way to go," he said.

In its fiscal second quarter, which ended Sept. 30, new editions of EA's popular sports franchises remained a key revenue driver, the company said. Gamers bought 4.5 million copies of "Madden NFL 08" and 2.9 million copies of "FIFA 08" during the period.

Some new titles also made solid debuts. "MySims," a game made for the Nintendo DS and Wii, sold over 1 million copies while "Skate" sold more than 500,000 units.

For the quarter, EA posted a net loss of $195 million, or 62 cents per share, compared with a profit of $22 million, or 7 cents per share, in the same period a year ago.

The company attributed part of the loss to a change in how it accounts for sales of online-enabled games, now recognizing the sales on a deferred basis over an estimated service period.

Adjusted earnings, excluding the change in revenue recognition and other items, were $87 million or 27 cents per share, up from $65 million or 21 cents per share a year earlier. On that basis, EA beat Wall Street's earnings expectations of 20 cents per share, according to a survey by Thomson Financial.

Revenue, however, fell 18 percent to $640 million from $784 million a year ago. But EA said it booked $296 million in sales of online-related products that will be accounted for in future periods. If it had included the deferred revenue, sales would have been $936 million, an increase of 19 percent from the year-ago period, the company said.

For the fiscal third quarter, EA forecast adjusted earnings of 75 cents to 95 cents per share on sales of $1.33 to $1.58 billion.

Analysts were predicting earnings of 94 cents per share.

For its fiscal year, which ends in March, the company predicted sales between $3.35 billion and $3.65 billion, up $150 million from its previous guidance. Adjusted earnings are expected to fall between 85 cents per share and $1.15 per share, reflecting a decrease of 5 cents per share stemming from the impact of its proposed acquisition of BioWare Corp. and Pandemic Studios.

Analysts were projecting adjusted earnings of $1.15 per share on sales of $3.77 billion.

EA said the restructuring plan will save it $25 million to $30 million a year on a pretax basis.

EA shares fell $2.38, or 3.9 percent, to close at $58.74 Thursday but rose $3.06 in after-hours trading following the quarterly report's release.

© 2007 The Associated Press