* Oper profit 56 cts/shr vs Wall Street view 88 cts/shr
* Will narrow its game portfolio and delay some games
* Boosts job cuts to 1,100 from previously announced 1,000
* Shares up 6.7 pct in relief rally over 2010 outlook
(Adds earnings details, analysis, background, byline; updates
By Franklin Paul
NEW YORK, Feb 3 Video game publisher Electronic
Arts Inc ERTS.O posted weaker-than-expected results and said
it would delay the release of several games, causing it to
forecast a loss for the current fiscal year.
But EA shares rose 6.7 percent in what analysts called a
relief rally as the company's outlook for fiscal 2010 was not
as bad as some had feared. Shares of EA, which goes
head-to-head with Activision Blizzard Inc (ATVI.O) for the
title of biggest publisher, had hit a year-low on Monday.
"The most surprising positive thing, although I don't know
if I believe it at this point, is their guidance for next
year," said analyst Daniel Ernst from Hudson Square Research.
"Their guidance seems overly optimistic in light of overly
worse-than-expected results here. It's going to be very much a
'show me' story."
The publisher of popular franchises such as "Need For
Speed" and "Madden NFL" forecast fiscal 2010 earnings before
items at about $1.00 per share on net revenue of $4.3 billion.
Analysts on average had expected earnings of $1.13 per share on
revenue of $4.8 billion, according to Reuters Estimates.
EA's fiscal third-quarter net loss was $641 million, or
$2.00 a share, compared with a loss of $33 million, or 10 cents
a share, a year ago.
Excluding costs related to restructuring and other special
items, EA had a profit of 56 cents a share for the quarter
ended Dec. 31, far short of analysts' expectations of 88 cents,
according to Reuters Estimates.
While experts expect the video game software industry to
manage the recession better than others, companies like EA have
been hurt by tighter inventory management at retailers which
don't want to overstock their stores with titles that are not
For example, where retailers might previously have
pre-ordered 1 million copies of a new title like the latest
"Lord of The Rings" game, they may now only order 400,000, and
might be slow to reorder additional copies, analysts said.
EA Chief Financial Officer Eric Brown told Reuters in an
interview that the video game industry overall was doing well
and that demand was good but concentrated on the best-selling
He said EA expected to develop 10 to 20 percent fewer game
titles in fiscal 2010, which begins in April, than in the
current fiscal year.
EA said it would delay the release of "Sims 3," "Godfather
2" and "Dragon Age" to fiscal 2010 from fiscal 2009, and that
it would narrow its product portfolio and cut other variable
MORE JOB CUTS
The company, based in Redwood City, California, also said
it would cut 1,100 jobs, or about 11 percent of its workforce,
higher than the 1,000 it announced in December. It also plans
to close 12 facilities as it narrows its product portfolio.
EA expects to incur total restructuring charges, including
severance and facility closures, of $65 million to $75 million,
which will be recorded over the next 12 months.
Fiscal third-quarter revenue rose 10 percent in the last
quarter to $1.65 billion. Analysts had expected $1.9 billion,
according to Reuters Estimates.
"The quarter was definitely worse than I thought,
definitely below the most pessimistic of expectations," said
analyst Todd Greenwald of Signal Hill Group. "The sort of
silver lining on the cloud: they gave fiscal 2010 guidance that
is slightly above where I was and slightly below consensus, but
I think people were fearing worse."
EA in December warned its fiscal 2009 profit and revenue
will fall short of already-low forecasts due to disappointing
holiday sales of its video games in North America and Europe.
It forecast a loss of 35 cents per share, excluding items,
in fiscal 2009 on net revenue of $4.1 billion. Analysts were
expecting a profit of 60 cents per share on $4.6 billion in
revenue, according to Reuters Estimates.
EA shares rose to $16.55 in extended trading from their
close of $15.50 on Nasdaq. The stock had hit a 12-month low of
$14.66 on Monday.
(Reporting by Franklin Paul; editing by Richard Chang)
(Email: Franklin.Paul@thomsonreuters.com; +1 646 223 6195;
Reuters Messaging: Franklin.Paul.firstname.lastname@example.org)
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