Harry Potter waved his wand, but the magic just wasn't enough to lift Electronic Arts during the first quarter ended June 30. Sales were down and net loss was up. The publisher is expecting a strong year in the end, however. The company has raised its fiscal 2008 revenue outlook. [Update: added conference call details, including info on Spore]Electronic Arts announced its first quarter financial results today, which showed a four percent drop in sales despite the fact that Harry Potter and the Order of the Phoenix sold a whopping 2 million copies in a one-week period. Total revenues came in at $395 million compared to last year's $413 million. Net loss at the leading publisher was up from $81 million to $132 million for the quarter, and gross profit was down seven percent to $229 million.
Results for the quarter were driven by the aforementioned Harry Potter as well as Command & Conquer 3 Tiberium Wars, The Sims 2 Pets, Need for Speed Carbon and The Sims 2.
Although EA's earnings were down, and the publisher was recently overtaken by Activision for the first half of 2007, the company is poised for a stellar second half, following the reorganization of the company into four labels and the hiring of Microsoft's Peter Moore to head the all important sports division.
"In the last three months we announced the reorganization of our business into four Labels and welcomed Kathy Vrabeck and Peter Moore to EA," said John Riccitiello, Chief Executive Officer. "I'm pleased that our team, structure and strategy are coming together quickly."
"Looking ahead, we have a strong slate," added Warren Jenson, Chief Financial and Administrative Officer. "In the balance of the fiscal year, we plan to launch our full EA Sports lineup, Need for Speed Pro Street, MySims, Medal of Honor Airborne and ten new properties, including Army of Two, The Simpsons, Skate, Boogie and Rock Band."
Another important title from EA this fiscal year will be the Wii project being developed in collaboration with Steven Spielberg.
EA also noted that beginning this quarter, the company will no longer charge for hosting services related to certain online-enabled packaged goods games. "As a result, the Company recognizes revenue from the sale of these games over the estimated hosting service period. This change resulted in a $36 million sequential increase in deferred net revenue as of June 30, 2007, which will be recognized in future periods," EA stated.
For the full fiscal year, EA raised its revenue guidance by $100 million. The company is now expecting revenue to be between $3.2 and $3.5 billion. Earnings per share guidance remains the same: between $0.90 and $1.20. For the second quarter, EA is expecting net revenue between $465 and $570 million and a loss per share between ($0.92) and ($0.76).
Following the earnings announcement, EA shares closed down 54 cents to $48.10 on Wednesday.
[UPDATE] In the earnings conference call, EA CEO John Riccitiello was clearly not very happy with his company's recent performance. Regarding the fact that EA's share has been down in North America, Riccitiello said it's "not acceptable." He's very optimistic with the slate of titles EA has in the pipeline for the rest of the year, however. Part of the strategy, according to Riccitiello, could include further acquisitions and making better use out of EA's R&D efforts.
As for the much anticipated Spore from Will Wright, Riccitiello noted that it's a "breakthrough product," the kind that only comes along every three, five or seven years. The game is apparently on track for an early fiscal 2009 release, meaning March, April, or May of next calendar year. That said, Riccitiello warned that EA wants to make sure to "ship a better game than an on-time game."
source:gamedaily.com
