* 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 stock price)
By Franklin Paul
NEW YORK, Feb 3 (Reuters) - 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 huge hits.
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 titles.
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 costs.
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.email@example.com) (To read more about our Media news, visit out MediaFile blog online at blogs.reuters.com/mediafile )