Electronic Arts 2Q loss expands; raises forecast

October 27, 2011 By RYAN NAKASHIMA , AP Business Writer
This Feb. 25, 2008, file photo, shows the exterior view of Electronic Arts Inc. headquarters in Redwood City, Calif. Electronic Arts Inc. reports quarterly earnings Thursday, Oct. 27, 2011, after the market close. (AP Photo/Paul Sakuma, File)

(AP) -- Video game maker Electronic Arts Inc. said Thursday that its second-quarter loss expanded from a year ago due to higher costs, even as revenue grew.

It raised its sales forecast for the all-important holiday season slightly above analyst estimates. CEO John Riccitiello said sales of "Battlefield 3," which launched two days earlier, were "very strong."

The net loss in the three-month period ending on Sept. 30 grew to $340 million, or $1.03 per share. Last year, the company had a quarterly loss of $201 million, or 61 cents per share. EA said costs for marketing, research and development increased from last year.

Excluding stock compensation costs, acquisition expenses and other costs, adjusted earnings came to 5 cents per share, beating the adjusted loss of 4 cents per share expected by analysts polled by FactSet.

Adjusted revenue, which accounts for deferred revenue from games with online components, rose 17 percent to $1.03 billion from $884 million, helped by sales of its sports games "FIFA 12" and "Madden NFL 12." That also beat the $955 million expected by analysts.

"Our results reflected a tremendous performance by our EA Sports titles and a strong showing on a new game on the Facebook platform, `The Sims Social,'" Riccitiello said on a conference call with analysts. "We're now focused on our biggest title for the holiday."

The company said it expects adjusted revenue in the current quarter through December of $1.55 billion to $1.65 billion, with the midpoint slightly higher than the $1.59 billion expected by analysts.

EA lifted the bottom end of its full-year adjusted earnings. It now expects a range of 75 cents to 90 cents, instead of 70 cents at the low end. Analysts were already expecting 89 cents.

The results didn't satisfy investors after a broad rally by stocks Thursday. Shares in the Redwood, Calif.-based company were down 80 cents, or 3.3 percent, at $23.50 in after-hours trading after closing up 11 cents at $24.50 in the regular session.

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5 / 5 (1) Oct 27, 2011
EA's market position might improve if they were to change their profit-ONLY-centered business model. EA's business model is rarely to produce their own content, but rather to:

(a) buy successful developers and
(b) EA-ify the company
(b)(1) slash costs, increase efficiency, reduce risk, maximize short-term profits
(b)(2) corollary to this is slashing developer budgets in areas EA doesn't think necessary (though usually these areas substantially factored into what originally made the game or studio successful); removing personnel for the same reasons; and favoring sequels, spinoffs, and franchises over creativity and new content and concepts--after all, these are far riskier and costlier than "Modern Warfare 6: Assignment Daycare" and "FIFA 2014: Same Ball, Different Teams."

EA may lose some money in the short term on new idea flops, but they could establish goodwill and make a name for themselves as innovators instead of greedy DLC-whoring fatcats if they operated differently.
5 / 5 (1) Oct 27, 2011
How about sinking some of that eight billion dollar market cap into supporting paradigm altering technology? They could work in any of these areas and more:

(a) New device/human interfaces:
...(1) haptics
...(2) EEG
...(3) camera-derived input (like Kinect, but much more could be done with this kind of platform)
(b) New game paradigms:
...(1) Surely the world has grown a little tired of strict FPS, RPG, etc. game construction
...(2) The world is changing: hire some anthropologists and sociologists to figure out how and how you can harness this for entertainment and education (maybe not in that order)
(c) New concepts within existing paradigms:
...(1) Why not integrate existing technology, like natural language processing of TEXT, into NPC conversations for more realistic RPGs?
...(2) Why not harness crowdsourcing on a bigger scale to do things like developing plot lines, creating content (e.g. maps, languages, dialogue), etc.?

EA has the resources to work outside the box. Most don't.

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