EA loses Star Wars users, shares tumble

Mon May 7, 2012 5:15pm EDT

Star Wars Storm Trooper characters cross the street outside the NASDAQ Market Site in New York's Times Square after taking part in ringing the opening bell for the trading day, December 20, 2011. REUTERS/Mike Segar

Star Wars Storm Trooper characters cross the street outside the NASDAQ Market Site in New York's Times Square after taking part in ringing the opening bell for the trading day, December 20, 2011.

Credit: Reuters/Mike Segar

(Reuters) - Electronic Arts lost 400,000 subscribers of "Star Wars: The Old Republic" in the fourth quarter, dealing a blow to its efforts to rely on the new game for growth and sending the game maker's shares down about 9 percent.

EA has poured more money and firepower into "Star Wars: The Old Republic" than it has any game in its 30-year history. Wall Street is closely watching to see if the game can succeed, since it could bring EA riches for years to come. If it struggles, EA's earnings will be hurt in future quarters.

Interim Chief Financial Officer Ken Barker said in an interview that EA is pleased with the stability of the game, but it wants to boost the subscriber base up with the release of two expansion packs this quarter that deliver players more content.

The subscriber numbers EA reported on Monday missed some analyst estimates. Brean Murray analyst Todd Mitchell was expecting 1.5 million paying subscribers.

"'Star Wars' is a nice role playing game but people are playing through it and leaving," Mitchell said.

EA had been hoping to take on its biggest rival, Activision Blizzard, which had more than 10 million subscribers to "World of Warcraft" last quarter. "Warcraft" is the 7-year-old Internet game that is Activision's most profitable franchise.

Video game companies such as EA and Activision have been trying to turn gamers from one-time purchasers into subscribers who generate a steady and predictable revenue stream to boost business and protect against economic uncertainty.

EA now expects EPS to be in the range of $1.05 to $1.20 per share for the year on revenue of $4.3 billion. Analysts on average are expecting EPS of $1.12 a share on revenue of $4.49 million, according to Thomson Reuters I/B/E/S. Sterne Agee analyst Bhatia said the company's earnings forecast was light and was likely affected by the performance of "Star Wars.'"

For the fiscal first quarter, the company expects EPS to be a loss of 45 cents per share to 40 cents per share.

Adjusted for the deferral of digital revenue and other items, the company said profit fell 33 percent to $56 million, or 17 cents per share, which beat Wall Street estimates by a penny. Adjusted revenue fell 2 percent to $977 million, which beat analyst estimates of $957.85 million, according to Thomson-Reuters I/B/E/S. Its futuristic game "Mass Effect 3" helped drive sales in the quarter.

The company's digital revenue hit $1.2 billion in the fiscal year. Its shares fell to $1.41, or 9 percent, in aftermarket trading after closing at $15.12 per share on Monday.

(Reporting By Liana B. Baker; editing by Andre Grenon and M.D. Golan)

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