Electronic Arts posts narrower Q1 loss; results miss estimates

(RTTNews) - Video game publisher Electronic Arts Inc. (ERTS | Quote | Chart | News | PowerRating) said Tuesday after the markets closed that first quarter net loss narrowed from last year, helped by new releases of Battlefield: Bad Company and UEFA EURO 2008 as well as continued strong performance of Rock Band. However, the company's quarterly loss per share, excluding items, was worse than what analysts expected as was its quarterly revenue. The company reiterated its revenue and non-GAAP earnings forecast for the fiscal year 2009, but cut its GAAP earnings outlook for the year.

The Redwood City, California-based company reported a GAAP net loss for the first quarter of $95 million or $0.30 per share, compared to a GAAP net loss of $132 million or $0.42 per share for the year-ago quarter.

Excluding the effects of deferred revenue for online enabled packaged goods games, stock options expenses, restructuring charges and other items, non-GAAP net loss for the first quarter was $135 million or $0.42 per share, compared to non-GAAP net loss of $69 million or $0.22 per share in the prior year quarter.

On average, 20 analysts polled by First Call / Thomson Financial expected the company to report a loss of $0.33 per share for the first quarter.

GAAP Gross profit for the quarter jumped 122% to $508 million from $229 million a year ago, while non-GAAP gross profit rose 17% to $317 million from $272 million last year.

GAAP revenue for the first quarter surged 104% to $804 million from $395 million in the same quarter last year.

The company said it recorded a net benefit of $231 million year-over-year related to the recognition of deferred net revenue for certain online enabled packaged goods games.

EA no longer charges for its service related to certain online enabled packaged goods games. As a result, the company recognizes revenue from the sale of these games over the estimated service period.

Excluding the effects of deferred revenue for online enabled games, non-GAAP revenue for the first quarter rose 41% to $609 million from $431 million a year earlier. Sixteen analysts had a consensus revenue estimate of $639.85 million for the first quarter.

Sales were boosted by new releases of Battlefield: Bad Company and UEFA EURO 2008 as well as continued strong performance of Rock Band, the popular music stimulation game EA co-publishes with MTV Games. Battlefield: Bad Company has sold 1.6 million copies so far.

Electronic Arts CEO John Riccitiello said, "Innovation and quality are rising, our games are more accessible and fun, and we have more new titles than at any time in our history. From SPORE on the PC to Dead Space on the PLAYSTATION 3 and Xbox 360 to MySims on the Wii and Nintendo DS to Scrabble on the iPhone and Facebook, this is the best title portfolio in the company's history."

EA makes most of its games for Sony's PlayStation 2 and PlayStation 3, Microsoft's Xbox 360 and Nintendo's Wii.

Total consoles revenue for the quarter jumped 131% year over year to $356 million, while PC revenue fell 3% to $86 million.

Total mobility revenue increased 51% to $122 million and co-publishing and distribution revenue surged 390% to $191 million.

So far in 2008, EA is the number one publisher in North America with 17% segment share and number two in Europe with 14% share.

During the quarter, EA bought Hands-On Mobile Korea, a Korean mobile developer and publisher, best known for its mobile role-playing game, Heroes Lore. EA also acquired ThreeSF, Inc., a social network for gamers.

Looking forward, the company said it continues to expect GAAP revenue of $4.9 billion to $5.15 billion and non-GAAP revenue of $5.0 billion to $5.3 billion for the fiscal year 2009.

The company reiterated its fiscal year 2009 non-GAAP earnings guidance of $1.30 to $1.70 per share but cut its GAAP earnings outlook to a range of $0.21 to $0.48 per share from its prior outlook of $0.25 to $0.52 per share.

Analysts currently expect the company to earn $1.59 per share on revenue of $5.15 billion for the fiscal year 2009.

Additionally, the company said its highly anticipated game Spore would debut on September 7.

EA did not provide any update on its proposed $2 billion takeover offer for rival Take-Two Interactive Software Inc (TTWO | Quote | Chart | News | PowerRating). Take-Two, publisher of highly successful videogame franchise "Grand Theft Auto IV," has rejected the $25.74 per share tender offer as too low.

Last week, EA extended its tender offer for Take-Two for the fifth time to August 18 to allow the U.S. Federal Trade Commission or FTC to continue their review process.

In February, EA made an unsolicited public offer of $26 per share for Take-Two, which promptly rejected the price as too low. Next month, EA commenced a tender offer to acquire all of the currently outstanding common shares of Take-Two for $26.00 per share in cash. On April 18, the company lowered its offer price to $25.74 per share, citing dilution caused by a new management compensation package approved by Take-Two's shareholders. The video game industry is becoming highly competitive, and companies are trying to own as much franchises as possible either through acquisition or tie ups.

Earlier this month, one of EA's closest rivals, Activision Inc., merged with the games unit of France's Vivendi SA to create Activision Blizzard Inc. (ATVID | Quote | Chart | News | PowerRating). It is currently the world's largest video-game maker.

Given the performance of Take-Two's stock since the original EA bid, the industry scenario and EA's own performance, analysts feel that the combination will be in the best interest of both the companies.

EA shares, which have traded in a range of $43.13 to $61.62 over the past year, closed Tuesday's regular trading session at $47.40, up $1.35 or 2.93%. The stock is losing $1.75 or 3.69% in after hours trading.

For comments and feedback: contact editorial@rttnews.com Copyright(c) 2008 RealTimeTraders.com, Inc. All Rights Reserved

More News:   Market Updates | Stock Alerts | All Trading News | Stock Index