EA Loses $310 Million, Sees "Weakness At Retail" In October

Illustration for article titled EA Loses $310 Million, Sees "Weakness At Retail" In October

Electronic Arts announced its Q2 results today, posting a $310 million net loss for the quarter, despite seeing an increase in revenue totaling $894 million. That's a pretty big difference from last year, when, during the same time frame, EA lost just $195 million on income of $640 million. It takes money to lose money it seems. EA CEO John Riccitiello said during the company's earnings call that "We are starting to see weakness at retail in October, indicators that retailers and consumers are being more cautious." EA's observations may lead those who brand the video game industry as "recession proof" to slightly alter their opinions. It has already led EA to start cutting costs.That slowness is a red flag for the mega-publisher, which says it's "proactively making cost adjustments now." One of those adjustments is the axing of some 600 EA employees across the globe. Riccitiello and crew will also cut costs by eliminating what the CEO referred to as "marginal SKUs" and managing headcount "aggressively" going forward. "While we're very bullish long term, we're very cautious in the short term," Riccitiello said, saying the company was investing more than ever in digital distribution and its EA Partners program. "We experienced a few slips and kills," Riccitiello noted during the call, referring to publicly disclosed cancellations like EA LA's Tiberium and the delays of Harry Potter and the Half-Blood Prince and Pandemic's Saboteur and Lord of the Rings: Conquest as having an impact on revenue. A drop in back catalog titles was also blamed for weaker performance. It wasn't all bad news for EA, as sales of Madden NFL 09 topped 4.5 million copies during the quarter, with Spore nearly hitting 2 million copies sold in just three weeks, as did Mercenaries 2: World in Flames. Warhammer Online: Age of Reckoning, also moved 1.2 million copies, putting EA "back in the MMO game."

EA Reports Second Quarter Fiscal Year 2009 Results REDWOOD CITY, Calif., Oct 30, 2008 (BUSINESS WIRE) — ERTS | Quote | Chart | News | PowerRating — —800 Thousand Registered Users Playing Warhammer Online —Need For Speed, Mirror's Edge To Join Holiday Portfolio of 20 Titles Electronic Arts Inc. (NASDAQ:ERTS) today announced preliminary financial results for its fiscal second quarter ended September 30, 2008. Fiscal Second Quarter Results (comparisons are to the quarter ended September 30, 2007) Net revenue for the second quarter was $894 million, up $254 million as compared with $640 million for the prior year. During the quarter, EA had a net deferral of $232 million of net revenue related to certain online enabled packaged goods games and digital content as compared with $296 million in the prior year. Non-GAAP net revenue was $1.126 billion, up 20 percent as compared with $936 million for the prior year. Sales were driven by the launches of Madden NFL 09, SPORE(TM), Mercenaries 2: World in Flames(TM), NCAA(R) Football 09, Tiger Woods PGA TOUR 09, Warhammer(R) Online: Age of Reckoning(TM), as well as the continued strength of Rock Band(TM). Net loss for the quarter was $310 million as compared with net loss of $195 million for the prior year. Diluted loss per share was $0.97 as compared with diluted loss per share of $0.62 for the prior year. Non-GAAP net loss was $20 million as compared with non-GAAP net income of $87 million a year ago. Non-GAAP diluted loss per share was $0.06 as compared with non-GAAP diluted earnings per share of $0.27 for the prior year. Trailing-twelve-month operating cash flow was $219 million as compared with $145 million a year ago. The Company ended the quarter with cash and short-term investments of $1.825 billion. "Considering the slow down at retail we've seen in October, we are cautious in the short term," said John Riccitiello, Chief Executive Officer. "Longer term, we are very bullish on the game sector overall and on EA in particular. The industry is growing double-digits on the strength of three new game consoles and increases in the number of homes with broadband internet connections. EA is well positioned to benefit from these technology drivers due to the strength of our creative studios and our broad collection of game properties—from The Sims, to Spore and Madden NFL, to Warhammer Online." Highlights — Madden NFL 09 sold 4.5 million copies and was the number one title across all platforms in the quarter based on NPD data. — SPORE is a hit selling nearly 2.0 million copies in just 3 weeks — over 40 million creatures have been uploaded into Sporepedia(TM). SPORE is the number one title on the PC in North America and number three title in Europe year-to-date. — Warhammer Online: Age of Reckoning, an MMO from EA's Mythic Entertainment studio, sold 1.2 million copies in the quarter — with over 800 thousand current players. — The EA SPORTS core portfolio of annual simulation games takes a step up in quality — up 4 points year-over-year according to Metacritic's aggregated review score system on the Xbox 360(R) and PLAYSTATION(R)3 entertainment systems. — EA was awarded 5 of the 9 honors at the Leipzig Games Convention in Germany —Spore as best PC game; Mirror's Edge(TM) as best Xbox 360 game; Skate It as best Wii(TM) game; Warhammer Online: Age of Reckoning as best online game; and Sonic Chronicles, a game developed by EA BioWare, won best Nintendo DS(TM) game. — EA Mobile is the world's leading publisher of games for phones — with revenue of $47 million — up 24 percent year-over-year. — EA BioWare and LucasArts announced the development of Star Wars(R): The Old Republic(TM), a story-driven massively multiplayer online PC game. — EA signs publishing agreements with Grasshopper Manufacture and Epic Games. EA Announces Cost Reduction Plan EA announced today a cost reduction plan, which will include the elimination of approximately 6% of the Company's workforce. The Company estimates its cost reduction plan will result in annual pre-tax cost savings of approximately $50 million.

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Well Activision also reported a loss of 4% in after-hours trading. I read that the only company that has a positive posting on their stock is Take-Two. Anyways, if this keeps up [especially during the largest two months for the gaming industry - Nov. to Dec.], then video games may not be as recession proof as everyone thinks. Maybe then companies may only publish quality games?