Electronic Arts’ Fourth-Quarter Profit Tops Analyst’s Views

Electronic Arts’ Fourth-Quarter Profit
Electronic Arts Inc. posted a fivefold gain in fourth-quarter profit. Photographer: Tony Avelar/Bloomberg

Electronic Arts Inc., the second-largest U.S. video-game producer, posted a fivefold gain in fourth-quarter profit, after the shooting title “Dead Space 2” helped sales surpass analysts’ estimates.

Net income rose to $151 million, or 45 cents a share, from $30 million, or 9 cents, a year ago, Redwood City, California-based Electronic Arts said in a statement today. Profit minus some items totaled 25 cents, beating the 22-cent estimate of 22 analysts.

Shares of Electronic Arts are up 22 percent this year on investor expectations for the multiplayer online offering “Star Wars: The Old Republic,” which the company said will be released in the second half of this year. The game will compete with Activision Blizzard Inc.’s “World of Warcraft.”

“‘Star Wars’ is a massive swing factor to fiscal 2012 results -- the earlier the release, the better,” Evan Wilson, a Pacific Crest Securities analyst, wrote in a May 2 note. “We still think it is setting up as a good title.”

The game could be released as early as July, Eric Brown, chief financial officer, said in an interview. The company “has a very good idea what the actual date is” and is promising delivery only before December for competitive reasons, he said.

First-Quarter Sales

Fiscal first-quarter sales, excluding items such as changes in deferred revenue, will be $460 million to $500 million, compared with analysts’ estimates of $513 million. Excluding items, Electronic Arts expects to report a loss of 44 cents to 49 cents a share, compared with analysts projections for a 37-cent loss, the average of 16 estimates.

Sales in the fourth quarter ended March 31, also excluding changes in deferred revenue, totaled $995 million, exceeding analysts’ estimates of $923.5 million.

Chief Executive Officer John Riccitiello has said “Star Wars” will become profitable after reaching 500,000 subscribers and “substantially profitable” at 1 million.

The game could add $162 million in revenue at 1 million subscribers, with an operating profit of $26 million, said Doug Creutz, an analyst with Cowen & Co. who has a “neutral” rating on the shares, in a research note April 26. Revenue would double, with operating profit tripling, at 2 million paying subscribers, he estimates.

The company yesterday announced plans to buy Firemint, a 60-person Australia-based studio that makes games for Apple’s iOS devices, for an undisclosed sum.

Digital Sales

Sales of games sold digitally were up 46 percent for the year, Brown said. The company expects its digital business to top $1 billion in the current fiscal year, joining Tencent Holdings and Activision Blizzard as one of the few companies around the world to reach that figure, he said.

Electronic Arts this year faces the potential for lost sales with its core “Madden NFL” football game if a labor dispute drags into the new season. The company also faces difficult comparisons to a year ago, when FIFA’s World Cup boosted interest in its game.

Electronic Arts rose 56 cents to $20.48 at 5:38 p.m. New York time in extended trading after results were announced. The shares declined 24 cents to $19.92 at 4 p.m. New York time in Nasdaq Stock Market trading.

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