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Profit soars for games maker EA

Leading games publisher Electronic Arts zooms past estimates for its second quarter, partly allaying concerns that the games industry may not live up to end-of-the-year expectations.

Leading games publisher Electronic Arts zoomed past estimates for its second quarter, partly allaying concerns that the games industry may not live up to end-of-the-year expectations.

EA reported net income of $50 million, or 34 cents a share, for the quarter ended Sept. 30. That compares with a loss of $32.8 million, or 24 cents a share, in the same period a year ago. Sales for the quarter were $453 million, compared with $240 million a year ago.

Analysts polled by tracking firm First Call had predicted earnings of 17 cents a share.

EA credited strong sales of games such as those in its "Madden NFL" football franchise and said the best is yet to come, with soon-to-be released titles based on Harry Potter, "The Lord of the Rings" and James Bond. "EA is hitting on all cylinders," Chief Financial Officer Warren Jenson said in a statement.

EA's strong results come at the beginning of the most critical time of the year for games companies, which rely on holiday sales for the bulk of their revenue. Expectations for the remainder of the year were rattled early this week when publisher THQ lowered its fourth-quarter forecasts and several analysts downgraded game stocks, prompted mostly by fears of a weakening retail climate.

The current quarter is especially important for Electronic Arts because of the scheduled release next month of "The Sims Online," the multiplayer online version of the smash PC game. EA expects the game to mimic the success of the offline version and create a new audience for subscription-based games.

EA expects to have at least 200,000 subscribers paying about $10 a month for the game by the end of its fiscal year, which would give the company's money-losing EA.com division a strong push toward profitability. Company President John Riccitiello said during a conference call with financial analysts that EA is deliberately keeping subscription fees below competing online games, such as Sony's "EverQuest," in hopes of attracting a broader audience.

"We believe there is a potential long-term for this to become a mass-market title," he said. "If anything can break through to the market as far as subscription models, we think this is it."

On the game console side, CEO Larry Probst said he expects Sony's PlayStation 2 to retain a commanding lead in the market, with Microsoft's Xbox and Nintendo's GameCube scrambling for second place. "It's still a horse race between GameCube and Xbox," he said, adding that EA will adjust its product mix if and when the balance changes.

EA said it's on track for per-share earnings of between $2.24 and $2.32 for the fiscal year, which ends March 31, putting it well ahead of First Call estimates that peg annual earnings at $2.01 a share.