Electronic Arts Drops as Forecasts Misses Analysts’ Views

Electronic Arts Inc. (EA), the second-largest U.S. video-game publisher, tumbled after its forecasts for the current quarter and fiscal year fell short of analysts’ estimates. The company plans to cut jobs.

Electronic Arts, based in Redwood City, California, dropped 4.3 percent to $14.48 in New York, for the lowest closing price since July 6, 2010. In a statement yesterday, the company forecast a fiscal first-quarter loss of 40 to 45 cents a share, excluding items. Analysts on average had estimated a loss of 33 cents, according to data compiled by Bloomberg.

The publisher of “FIFA” soccer and a “Star Wars” multiplayer online game is grappling with shrinking sales of packaged games and will incur a $40 million charge to cut jobs and terminate licenses in that older business. A new online title from PopCap Games, a company acquired last year for as much as $1.3 billion, won’t be out this quarter, said Michael Pachter, an analyst with Wedbush Securities.

“They planned on a PopCap social game this quarter, which is clearly not happening,” Pachter said in an interview. “There’s also probably a bit of conservatism at play here.”

Sales for the fiscal first quarter ending June 30, excluding items such as changes in deferred revenue, will be about $500 million, Electronic Arts said. Analysts were predicting $586.6 million on that basis.

Retail sales in the current quarter are being hurt by a lack of titles in comparison to a year ago, when “Dead Space 2” and other properties were released, Chief Executive Officer John Riccitiello said yesterday on a conference call.

Online Games

Electronic Arts is seeing double-digit growth in sales of mobile games, titles played for free on social sites such as Facebook Inc. and on company websites, Riccitiello said.

The company will end the year with about the same number of employees as it continues hiring outside the package goods area, according to John Reseburg, a spokesman.

Riccitiello also said the company, as it balances research and development priorities, will delay a major title into the next fiscal year. He declined to identify the game. The company is spending $80 million this year related to titles for a new generation of consoles, he said on the call.

Electronic Arts projected $4.3 billion in adjusted revenue for the year, short of the $4.51 billion average estimate of 20 analysts. The company forecasts full-year adjusted profit of $1.05 to $1.20 a share, compared with $1.16 seen by analysts.

Fiscal fourth-quarter net income rose to $400 million, or $1.20 a share, in the period ended March 31, from $151 million, or 45 cents, a year earlier, Electronic Arts said. Profit minus some items totaled 17 cents, beating the 16-cent average of 20 analysts’ estimates compiled by Bloomberg.

Full-Year Sales

Sales excluding items such as changes in deferred revenue totaled $977 million, topping analysts’ projections of $958.4 million. Total sales increased 26 percent to $1.37 billion, from $1.09 billion a year earlier.

Electronic Arts has increasingly made its products, once sold only as packaged goods, available over the Internet as consumers spend more money on games online. The company signed up more than 1.3 million active users for its “Star Wars: The Old Republic” multiplayer game, down from the 1.7 million users it reported in March. The game competes with Activision Blizzard Inc. (ATVI)’s “World of Warcraft.”

Digital sales for the quarter nearly doubled to $419 million from $211 million a year ago.

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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