EA Makes Three-Year Growth Plan, Quits Quarterly Guidance

Illustration for article titled EA Makes Three-Year Growth Plan, Quits Quarterly Guidance

During its call to investors, Electronic Arts said that it will no longer provide quarterly estimates of its financial guidance. Why?


The company said that in the event it has to delay titles to benefit their long-term quality, it'd take a big hit on the quarter that wouldn't necessarily be indicative of an annual loss. Moving away from a quarterly guidance model is a method by which companies can keep their stock from slumping on short-term problems.

The decision's likely due to some volatility EA saw during the year thanks to delays such as Mass Effect PC's push-back that don't actually indicate financial losses — it just means the company makes money in a different quarter than it may have planned. Shifting to an annual guidance model may allow the company more flexibility as risk levels rise in the burgeoning video game industry.


EA did not, however, note any specific plans to delay any upcoming titles. Executives explained their decision:

"The nature of our business is fairly variable quarter to quarter based on release schedules. We've a multi-year business plan for the first time," said chief financial officer Eric Brown, who replaces the recently-departed Warren Jenson. "We're looking out 3-plus years as opposed to 3-plus quarters, and we think its appropriate... so that we're making good decisions for the long term."

"We'll be providing an update on the full-year guidance, but we'll be speaking to our full-year expectations versus just 90-day expectations."

CEO John Riccitiello said that analysts' high estimates for EA's first half had surprised him, given that key title Spore doesn't come out until September. "We said 63 to 68 percent of our revenue is expected in second half," he said.


What might EA do to prevent further delays? Riccitiello told analysts that while he hopes ship times to improve, improving quality is an even higher priority. "I can say without hesitation our quality is going to be up this year versus the prior year. Ship timing is going to be improved versus prior year."

But in the event those two conflict? "Ship time will give before quality," Riccitiello said.

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A financially inclined friend of mine (who isnt a gamer) once asked me : "If Hollywood can stake out a movie release date 2-3 years in advance and meet that date reliably and publishing houses can do the same, why can't the software industry?"

I initially replied that the creative process in making software was fundamentally different what with additional variables and more new technologies per effort compared to filmmaking. In retrospect, however, from a financial perspective I can see his point. To him its a question of can you meet your date or not and if not why would I have confidence that you know what you are doing. We are certainly much more tolerant of delays from the software industry than we are of any other artistic or technical entity (with the notable exception of aerospace)