Electronic Arts Posts Unexpected $96 Million Profit
Electronic Arts Inc., the second- largest video-game publisher, posted an unexpected $96 million first-quarter profit on better-than-projected sales of titles including “2010 FIFA World Cup South Africa.”
Net income of 29 cents a share compared with a loss of $234 million, or 72 cents, a year earlier, Redwood City, California- based Electronic Arts said today in a statement. Excluding some items, the company had a loss of 24 cents in the period ended June 30, smaller than the average 35-cent loss estimated by 21 analysts in a Bloomberg survey.
Online games and titles for Apple Inc.’s iPad contributed to the results. Chief Executive Officer John Riccitiello has cut more than 2,500 jobs since 2008 to reduce costs and stem three years of losses. In November, the company bought Playfish, the second-largest maker of games on Facebook, for as much as $400 million to gain a bigger foothold in casual, online play.
“The expenses appear to be under control,” said Colin Sebastian, an analyst at Lazard Capital Markets in San Francisco who has a “hold” rating on the stock. “EA continues to make some progress on its turnaround.”
The global market for online games is projected to grow by a third to $20 billion in 2010, according to Sebastian. Meanwhile retail sales of game hardware and software in the U.S. fell 9 percent in the first half of the year, according to NPD Group Inc., a Port Washington, New York-based researcher.
Electronic Arts’ sales of online games increased 52 percent to $188 million from a year earlier, Eric Brown, the company’s chief financial officer, said in an interview.
“We feel confident about the slate of games coming,” Brown said.
In July, Electronic Arts sold its 15 percent of Ubisoft Entertainment SA, Europe’s largest video-game maker, for $122 million, people close to the deal said.
First-quarter sales minus some items totaled $539 million, compared with estimates of $504.7 million. Analysts had projected a net loss of $32.2 million for the quarter, the average of 13 estimates.
Electronic Arts’ roster of holiday releases should boost sales, Michael Pachter, an analyst at Los Angeles-based Wedbush Securities Inc., wrote in a note to investors before earnings was released. The titles include “Crysis 2,” “Dead Space 2,” “EA Sports Active 2.0” and “The Sims 4.”
This quarter, the company forecasts sales of $775 million to $825 million, excluding some items. The company predicts a loss of 10 cents to 15 cents a share on that basis.
Analysts project a loss of 11 cents, the average of 20 estimates, on revenue of $815.8 million.
Electronic Arts rose 86 cents to $16.94 in extended trading after results came out. The stock lost 32 cents to $16.18 at 4 p.m. New York time in Nasdaq Stock Market trading and has fallen 8.8 percent this year. Activision Blizzard Inc. is the largest video-game publisher.