Quarterly profits at Electronic Arts Inc. plunged 91% because of withering competition and disappointing sales of its most popular videogames, and executives said the company will likely lose money in
SAN JOSE, Calif. (AP) -- Quarterly profits at Electronic Arts Inc. plunged 91% because of withering competition and disappointing sales of its most popular videogames, and executives said the company will likely lose money in the current quarter.
EA, the world's largest videogame software maker, announced May 3 fiscal fourth-quarter earnings of $8 million, or 2 cents per share, compared with $90 million, or 29 cents per share in the same period of 2004. After the announcement, shares fell $5.96, or 11.3%, in after-hours trading.
Excluding special items, such as employee stock-based compensation and some legal expenses, the software company earned $30 million, or 9 cents per share, down 61% from $77 million, or 25 cents per share, in the fourth quarter of 2004.
For the three months ended March 31, the Redwood City-based company reported quarterly revenue of $553 million, down 7.5% from $598 million in the year-ago period.
Profits for fiscal 2005 plunged nearly 13%. EA reported fiscal year earnings of $504 million, or $1.59 cents per share, compared with $577 million, or $1.87 cents per share in fiscal 2004.
Excluding special items, the company earned $543 million, or $1.71 per share, down 4% from $566 million, or $1.84 per share, in fiscal 2004.
For all of fiscal 2006, the company expects to report a profit of $1.55 to $1.70 per share, with revenue rising 9% to 12% to $3.4 billion from $3.5 billion. Analysts were looking for net income of $1.71 per share on revenue of $3.39 billion.
CFO Warren Jenson acknowledged in a conference call May 3 that the company had "missed our fourth quarter."
"It was a year of many positives but also a year of many disappointments," Jenson said.
Company executives cited higher costs connected with purchasing licenses, growing competition and lower demand for games in anticipation of new set-top boxes, which are due to hit the market, as the reasons for its poor showing this quarter.
Makers of videogame players, such as Sony and Microsoft are due to launch new videogame machines, and analysts say the public is uninterested in spending money on games designed for outdated equipment. Many consumers postpone new purchases until new versions of their favorite hardware and software are released, said P. J. McNealy, a senior analyst at American Technology Research.
McNealy said that he is confident EA will emerge from the industry-wide slump in the same spot that it entered it: No.1.
"These guys are the blue chip company of their sector," McNealy said. "This is only proof that they are not immune to the down cycle."