Electronic Arts lowers 2010 guidance as sales weak

January 11, 2010
In this Feb. 25, 2008 file photo, the exterior view of Electronic Arts Inc. headquarters in Redwood City, Calif. is shown. Video game publisher Electronic Arts Inc. on Monday, Jan. 11, 2010 cut its full-year guidance as it blamed weak demand in Europe and a shift toward games with lower profit margins in North America. (AP Photo/Paul Sakuma, file)

(AP) -- Video game publisher Electronic Arts Inc. cut its full-year guidance on Monday, as ongoing weakness in its game disc sales didn't ease up over the holidays as the company had hoped.

The news sent shares down sharply in extended trading.

EA, best known for such games as the "Madden" football series and "The Sims," blamed weak sales in Europe as well as a shift toward titles it distributes for others, which have a lower profit margin than that for games it creates internally. Europe makes up roughly a third of the company's sales.

But beyond that, many of EA's packaged games - titles sold in stores such as GameStop and Best Buy - haven't been selling too well, and its digital business, though growing, is still too small to make up for it.

For the fiscal year ending in March, EA lowered its adjusted profit outlook to between 40 cents and 55 cents per share. That is down sharply from its earlier outlook of 70 cents to $1 per share, and below analysts' expectations of 79 cents per share, as polled by Thomson Reuters.

EA also gave a disappointing outlook for the October-December quarter, a crucial period for video game companies that rely heavily on holiday sales.

Wedbush Morgan analyst Michael Pachter said the company simply "did not have the products that people wanted" and should be acknowledging that rather than "blaming everything on the environment."

"This company lacks introspection," he said. "Their core business is not performing well and they can't explain why."

Last year was a challenging one for EA as well as for the video game industry, which took a late hit from the economic downturn after initially seeming resistant to the recession.

In November, the company cut its work force by 17 percent - 1,500 people - but also paid $275 million to buy Playfish Inc. a maker of social online games. The moves, announced on the same day, signaled EA's attempts to align its business with a video game industry that's evolving from selling packaged goods to distributing games online, on mobile devices and in bite-sized bits.

EA expects a third-quarter net loss to fall between 24 cents and 32 cents per share. Adjusted for changes in deferred revenue for digital content and online-enabled games, as well as restructuring charges and other items, EA expects earnings of 29 cents to 33 cents per share for the quarter, well below Wall Street's estimates of 56 cents per share.

EA is forecasting sales of about $1.23 billion to $1.25 billion during the quarter. Adjusting for those same factors, EA projects adjusted revenue of $1.33 billion to $1.35 billion, short of Wall Street's expectations of $1.42 billion in sales.

For the full fiscal year, EA sees net sales at $3.6 billion to $3.68 billion, compared with its prior outlook of $3.6 billion to $3.9 billion. On an adjusted basis, it expects sales of about $4.13 billion to $4.2 billion. Analysts expected adjusted sales of $4.26 billion.

Shares in EA, which is based in Redwood City, Calif., dropped $1.72, or 9.4 percent, to $16.55 in after-hours trading. The stock had closed down 13 cents at $18.27.

Explore further: EA 1Q loss widens but results surpass expectations


Related Stories

EA 1Q loss widens but results surpass expectations

August 4, 2009

(AP) -- Lower revenue from packaged video games amid a seasonal slump for the industry gave Electronic Arts Inc. a larger net loss in its fiscal first quarter. But investors cheered as its adjusted results soundly surpassed ...

EA posts smaller 4Q loss as costs decline

May 5, 2009

(AP) -- Video game publisher Electronic Arts Inc. posted a smaller net loss Tuesday for its fiscal fourth quarter as it further slashed costs in a quarter that had fewer hit game launches.

Soft PC sales send Microsoft profit down 29 pct

July 23, 2009

(AP) -- Microsoft Corp. said Thursday its profit in the last quarter plunged 29 percent because of weak computer sales, ending a fiscal year in which the software maker's revenue fell for the first time since the company ...

Texas Instruments 2Q profit falls 56 percent

July 20, 2009

(AP) -- Chip maker Texas Instruments says its second-quarter earnings fell 56 percent from a year ago, clipped by a weak economy that the company expects will "take some time" to strengthen.

Recommended for you

Dutch open 'world's first 3D-printed bridge'

October 17, 2017

Dutch officials toasted on Tuesday the opening of what is being called the world's first 3D-printed concrete bridge, which is primarily meant to be used by cyclists.


Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.