By Sarah E. Needleman
Electronic Arts Inc. swung to a profit on stronger than expected
revenue in its third fiscal quarter, as more consumers in the
holiday season snapped up software for discounted videogame
consoles and downloaded more digital content.
The results easily topped analyst expectations and the company's
own projections. But EA's forecast for the fourth quarter was
weaker than Wall Street expected, which the company attributed
partly to sales that may have been accelerated to the third
period.
EA's shares rose 3% in after-hours trading.
The company, based in Redwood City, Calif., is known for
videogames such as the Madden NFL franchise, FIFA soccer titles and
the newer "Titanfall" shooting game. The company and some
competitors have been aided by demand for new software following
the fall 2013 introduction of new game consoles from Sony Corp. and
Microsoft Corp.
But Blake Jorgensen, EA's chief financial officer, said sales of
software for older consoles being sold at discounted prices such as
the Xbox 360 were surprisingly strong.
"The discounts might have brought new buyers into the market
that didn't exist before," he said in an interview. "There's a
consumer that didn't want to spend $400 on a console."
Demand for software for the latest generation of consoles also
outperformed EA's results last year, now that they have also come
down in price, Mr. Jorgensen added. "Our products did better than
we expected and the overall market was stronger than we expected,"
he said.
The sales surge above expectations in part prompted the company
to temper its forecast for the quarter ending March 31--even though
its newest "Battlefield" shooting game is slated to launch in
March, following requested changes from beta testers pushed back
its original launch date from last fall. "Some people may have been
buying in Q3 that we assumed would buy in Q4," Mr. Jorgensen
said.
Other reasons for the tempered outlook next quarter include
plans to delay shipment of two products--a PGA golf game and a Sims
expansion pack--from the fourth quarter to the beginning of the
next fiscal year.
Additionally, EA is awaiting revenue from sales of its FIFA
franchise in Asia, which is dependent in part on help from partner
Tencent Holdings Ltd. "We don't know if we'll be able to recognize
that revenue in Q4 or Q1," Mr. Jorgensen said, adding that the
company could be affected by worsening currency exchange rates.
EA said it generated the most revenue and unit sales of software
last year for Sony's PlayStation 4 and Microsoft's Xbox One of any
game publisher in the world based on data it gathered from a
variety of sources, including market research firm NPD Group.
The company posted net income for the period ended Dec. 31 of
$388 million, or $1.22 a share, compared with a loss in the
year-earlier period of 3%, or $1.26 per share. Revenue fell 9% to
$1.43 billion from $1.57 billion.
Adjusting for items such as deferred revenue from services, the
company reported earnings per share of 44 cents on $1.42 billion in
revenue. Analysts on that basis had expected earnings of 92 cents a
share on revenue of $1.29 billion, according to Thomson First
Call.
For the quarter ending March 31, EA on that adjusted basis had
projected earnings per share of 22 cents on revenue of $830
million. Analysts had expected earnings of 26 cents a share on
revenue of $912 million.
Write to Sarah E. Needleman at sarah.needleman@wsj.com
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