Electronic Arts Nears Five-Year High After Beating Estimates

Electronic Arts Inc., the second-largest U.S. video-game maker, rose to an almost five-year high after growth in sales of Web-delivered titles led to a smaller-than-projected first-quarter loss.

The loss, excluding some items, totaled 40 cents a share, Redwood City, California-based Electronic Arts said yesterday in a statement. That compares with the average analyst estimate of a 60-cent loss, according to data compiled by Bloomberg. Sales before changes in deferred revenue rose less than 1 percent to $495 million, topping the $454 million projection.

The results highlight Electronic Arts’ transition from a maker of games sold mostly at retail stores to one that plans to generate the bulk of its revenue from digital downloads within the next five years. Online sales rose 17 percent to $378 million, with digital titles including “Simpsons: Tapped Out” and “Real Racing” contributing in a quarter when the company had no major packaged-goods release.

“Digital is hitting on all cylinders,” Chief Financial Officer Blake Jorgensen said in an interview. “The mobile business in particular just continues to see great growth year over year.”

Net income in the period ended June 30 rose 10 percent to $222 million, or 71 cents a share, from $201 million, or 63 cents, a year earlier.

Electronic Arts rose 9.1 percent to $25.99 at 10:51 a.m. in New York after reaching $26.40, the highest since October 2008. The shares was up 64 percent this year as of yesterday.

Executive Search

The search to replace former Chief Executive Officer John Riccitiello is continuing, with Electronic Arts’ board interviewing both internal and external candidates, Jorgensen said. Riccitiello resigned in March after the company lowered its outlook several times.

Like other game makers, Electronic Arts has reduced the number of packaged titles it makes for consoles to devote more resources to the Web. As users gravitate to mobile and online games, sales of $60 console games have declined.

The industry is anticipating that demand for games will be spurred by a new PlayStation from Sony Corp. and Xbox One from Microsoft Corp., both arriving in time for the holidays.

Second-quarter profit, excluding some items, will be about 12 cents a share, on sales of $975 million before changes in deferred revenue, according to the statement. Analysts projected a 14-cent profit on sales of $979.8 million.

Electronic Arts also reaffirmed its fiscal 2014 guidance for profit of $1.20 a share, excluding items, on $4 billion in revenue, roughly in line with analysts’ estimates.

“We’ve got a long season ahead of us and obviously a lot of challenges still to come,” Jorgensen said about the console upgrades.

Electronic Arts also is moving to regularly update titles such as “FIFA” soccer and “Battlefield” with new material. The company has a multiyear agreement with Walt Disney Co. to create games based on “Star Wars” characters, after Disney said it would stop making them itself.

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