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Electronic Arts Surges After Profit Beats Estimates, Analysts' Upgrades

Electronic Arts Inc., the second- largest U.S. video-game maker, rose the most in more than two years in Nasdaq trading after reporting third-quarter profit that exceeded analysts’ estimates.

Electronic Arts, based in Redwood City, California, jumped $2.47 to $18.09 at 4 p.m. New York time, the biggest gain since Oct. 28, 2008.

Third-quarter profit increased to 59 cents a share, excluding some items, Electronic Arts said yesterday in a statement, citing sales of titles including “Medal of Honor” and “Need for Speed.” Analysts predicted 56 cents, the average of estimates in a Bloomberg survey. Sales, excluding changes in deferred revenue, came to $1.41 billion, compared with the $1.43 billion average estimate.

The long-awaited “Star Wars” online subscription-based game, due after April, will cost less than most estimates, some as high as $300 million, and can be profitable with just 500,000 ongoing users, Chief Executive Officer John Riccitiello said in a conference call with analysts after the earnings report.

The company also announced a $600 million share repurchase program, its first since fiscal 2004.

Anthony Gikas, an analyst at Piper Jaffray Cos. in Minneapolis, raised his rating on the stock today to “overweight” from “neutral” and lifted his 12-month projection on the stock to $19.50.

Christopher Hickey, a London-based analyst at Atlantic Equities, raised his rating to “neutral” from “underweight” with a price target of $18 in the next 12 months.

Electronic Arts reported a 39 percent increase in sales of games sold digitally in the period ended Dec. 31. About 20 percent of revenue now comes from games for products such as Apple Inc.’s iPhone and iPad, Amazon.com Inc.’s Kindle and personal computers, the company said.

Forecast

The current quarter is running according to plan, Eric Brown, chief financial officer, said in an interview yesterday. The company released “Dead Space 2” to a Metacritic.com score of 91, and the sequel space-shooter game is outselling the original 2-for-1, he said.

The company forecasts fourth-quarter sales of $850 million to $950 million, excluding changes in deferred revenue. That compares with analysts’ projections of $939.4 million. Profit is projected at 15 cents to 25 cents a share, excluding some items, compared with analysts’ estimates of 21 cents.

Including changes in deferred revenue and other items, Electronics Arts reported its third-quarter net loss widened to $322 million, or 97 cents a share, from $82 million, or 25 cents, a year earlier. Sales on that basis fell 15 percent to $1.05 billion, the company said.

To contact the reporter on this story: Cliff Edwards in San Francisco at cedwards28@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net.

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