AP News, February 2nd, 2007
In a Feb. 1 story about Electronic Arts Inc.'s earnings, The Associated Press reported erroneously that third-quarter sales had dropped 38 percent. It was profits that dropped by that margin.
A corrected version of the story appears below.
___________________
SAN FRANCISCO (AP) _ Electronic Arts Inc., benefiting from brisk holiday sales of video games used on Sony Corp.'s new Playstation 3, exceeded Wall Street's earnings expectations Thursday despite fiscal third-quarter profits that dropped 38 percent.
Net income for the three months ended Dec. 31 was $160 million, or 50 cents per share, compared with $259 million, or 83 cents per share, during the same period last year.
Revenue for the quarter that ended Dec. 31 rose less than 1 percent to $1.28 billion from $1.27 billion a year ago.
Excluding special expenses, such as a $28 million charge resulting from a major accounting change in stock-based compensation, the world's largest video game publisher earned $201 million, or 63 cents per share.
On that basis, which does not comply with generally accepted accounting principles, analysts surveyed by Thomson Financial expected Redwood City-based EA to earn $184 million, or 57 cents per share, on sales of $1.27 billion.
Chief Financial Officer Warren Jenson, who raised earnings estimates for fiscal 2007, said the company was profiting from the growing niche of "interactive entertainment" _ subscriptions to online gaming sites, in-game advertising and micro-transactions from online players. The company will take in roughly $115 million in 2007 in interactive revenue sources, up from about $75 million last year.
"We're starting to see the beginnings of the digital area in interactive entertainment," Jenson said Thursday in an interview.
Jenson said revenue for the current quarter would be in the range of $550 million to $600 million. He said earnings, excluding special expenses, is expected to be 3 cents per share.
The company expects net revenue for fiscal 2007 to total $3.025 billion to $3.075 billion, better than the bottom-line estimate of $2.95 billion that the company had previously forecast.
The company expects fiscal 2007 earnings, excluding special expenses, to be 70 cents to 74 cents per share, up from previous estimates of 55 cents to 70 cents per share.
EA's most popular titles in the last quarter were "Need for Speed Carbon," "FIFA 07," "The Sims 2 Pets" and "Madden NFL 07," with each game selling more than 3 million copies.
EA has been a solid investment with long-term investors, and the stock has increased nearly 70 percent since 2002. The company has a lock on sports titles _ one of the biggest, most reliable and most lucrative segments of the gaming industry.
But critics wonder whether EA has been too long resting on the laurels of "FIFA," "Madden NFL" and other popular sports titles, as well as sequels to long-standing hits such as "The Sims."
"EA just mass-markets these sports titles every year, but they've been sucking on that pig for a long time and it's kind of painful to watch," said technology analyst David Gardner, co-founder and co-chairman of Alexandria, Va.-based Motley Fool. "I've been a happy investor for the last five years, but I don't know how long that will last. The company needs more innovation."
One of the most highly anticipated new titles in the gaming world is "Spore," the brainchild behind "Sims" developer Will Wright, considered one of the gaming industry's most brilliant artists. Through its Maxis Software brand, EA will release "Spore" _ an interactive game where players evolve from single-celled organisms into intelligent beings part of a complex, real-time civilization _ later this year.
Last quarter, EA sold $41 million in titles for the PlayStation 3, a highly anticipated gaming console that debuted in November. It sold $29 million in titles for Nintendo Co.'s Wii, and Chairman and CEO Larry Probst emphasized Thursday that EA would increase availability of Wii-friendly games.
EA also sold $400 million in titles for the older PlayStation 2 and $172 million in titles for Microsoft Corp.'s Xbox 360 last quarter.
Shares of EA ended the regular session Thursday on the Nasdaq Stock Market at $50.54, up 54 cents, or 1 percent. After the report was released, the stock gained another $1.96 in extended trading.
