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EA Profit Up, Outlook Disappoints

By Reuters
Published | Updated

LOS ANGELES – Electronic Arts Inc. (ERTS), the world's No. 1 video game publisher, Tuesday reported higher quarterly earnings on strong demand for new titles like Madden NFL 2005 (search), but its forecast for the all-important holiday season fell short of expectations.

EA, whose shares fell by 4 percent in after hours trade on INET, posted a profit of $97 million, or 31 cents per share for its fiscal second quarter ended Sept. 30, compared with a year-earlier profit of $77 million, or 25 cents per share.

Revenue rose to $716 million from $530 million a year earlier.

The company forecast revenue for its key fiscal third quarter ending in December of between $1.4 billion and $1.475 billion and earnings $1.16 and $1.26 a share, excluding items.

Those numbers compare with revenue of $1.475 billion last year and net income of $1.26 per share. Analysts had expected revenue of $1.5 billion and earnings of $1.28 per share, according to Reuters Estimates.

Financial Analyst Paul-Jon McNealy of American Technology Research (search) attributed the lower-than-expected third-quarter forecast to tougher competition.

"They don't have a game called 'Halo 2' or 'Grand Theft Auto (search),' he said, noting two popular titles, "and they are facing competition in areas that they haven't before, like the sports franchises," McNealy said.

He said the company's flagship Madden football titles were "under siege" from Take-Two Interactive Software Inc's (TTWO) ESPN 2K5 (search) sports games, which retail for about half the price.

Despite the company's forecast, Warren Jenson, EA's chief financial officer told Reuters in an interview that the company was optimistic about sales going into the holiday season.

"We have a pretty powerful lineup. We are launching 10 to 15 titles, all of which are proven franchises," he said.

Also Tuesday EA finalized its purchase of Criterion Software, and announced the repurchase of $750 million worth of shares.

Shares of Redwood City, California-based EA fell $1.85 per share, to $44.81 on the INET electronic trading system from a Nasdaq close of $46.66.