EA losses drop, but sales and outlook decline
Aggressive cost cuts trim Electronic Arts' quarterly loss, but lower game sales take a bite out of revenue. Meanwhile, the company lowers its forecast for current quarter.
Despite job layoffs and other cost cuts, Electronic Arts is still struggling to dig out of its current financial hole.
The game maker reported Monday that its fiscal third-quarter net loss narrowed to $82 million, down from a loss of $641 million in the year-ago quarter. Its quarter ended December 31.
EA was on a tear last year to slash expenses--laying off staff, closing down studios, and trimming its product line. But sluggish game sales, especially in Europe, took their toll on fiscal third-quarter revenue, which fell 25 percent to $1.24 billion from $1.65 billion in the year-ago quarter.
Revenue was also affected by a smaller number of titles released for the 2009 holiday-shopping season compared with 2008, the company said. Sales were driven mostly by a few new games, such as Dragon Age: Origins, Left 4 Dead 2, and NBA Live. But older standbys FIFA 10, Madden NFL 10, and The Sims 3 helped too.
The poor results didn't surprise analysts as Electronic Arts had already announced in January that its fiscal-third quarter would be weaker than expected. But the company also warned Monday that the current quarter's revenue will likely be lower--between $925 million and $1 billion--than had been anticipated. The news sent its stock down around 9 percent in Tuesday morning trading.
Despite the weak outlook, EA is pinning some hope on less-traditional business markets and a couple of new game titles.
"EA is growing share in our packaged goods business, and our digital businesses continue to grow rapidly," Chief Executive Officer John Riccitiello said in a statement. "Mass Effect 2 is the first blockbuster of 2010 and we are looking forward to the launch of Dante's Inferno and Battlefield Bad Company 2."
In particular, the company is eyeing the online game market as a potential source of more revenue. In its third quarter, EA's online game subscribers reached 1.9 million. As players buy fewer CDs in stores and increasingly hop onto the Internet for their game fix, Electronic Arts is trying to capitalize on that trend.
The company noted that its Playfish social gaming unit, which it bought in November, scored two of the top 10 Facebook games for the quarter. Reports have also surfaced that EA will launch a Facebook version of its popular Madden NFL franchise.
Still, many analysts remain pessimistic about Electronic Arts' near-term future, noting that the cost cuts aren't doing enough to turn the company around.