Video game giant Electronic Arts said today that it expects its quarterly and fiscal year revenues and earnings to be below its previous financial guidance.
EA is laying off 1,500 people, and so it was already known its performance is weak. But the surprise is that EA was also somewhat pessimistic about the year that ends March 31, 2011.
Eric Brown, chief financial officer of EA, said in a conference call that the company’s fiscal third quarter ended Dec. 31 will be short of internal expectations and consensus estimates because of a soft December for EA in Europe and a shift to lower-margin distribution titles in North America. Overall, Brown said retail games are likely to be flat or down in the fiscal year that ends March 31, 2011. The latter prediction surprised some analysts on the call.
EA said sell-through and reorders were below expectations. Digital games, such as online-based titles, were above expectations but not enough to make up for a shortfall in Europe in retail game sales. EA now expects non-GAAP results of $1.33 billion to $1.35 billion and non-GAAP earnings per share of 29 cents to 33 cents. The shift from games sold at retail to digital games played online has been very fast and dynamic, said John Riccitiello, chief executive of EA, on the conference call.
“What we have is a two-year turnaround that is taking longer” because of the dynamism in the sector, Riccitiello added.
He acknowledged that EA’s forecasts were so far off in 2009 that the company is planning for a more conservative view of the overall sector. Riccitiello said EA has a massively multiplayer online game planned for the spring of 2011 that should make a big difference in its earnings, but EA is excluding that revenue from its FY11 plan for now.
For the fiscal year, EA expects non-GAAP results of $4.125 billion to $4.2 billion in revenue and EPS of 40 cents to 50 cents a share. In the current fourth fiscal quarter, EA is launching Mass Effect 2, Battlefield: Bad Company 2, Dante’s Inferno, Army of Two: The 40th Day, and Command and Conquer 4.
Riccitiello said the rest of the year will include a “great new version of Medal of Honor,” a “revitalized” Need For Speed in fiscal 2011, “The Sims on console, Dead Space 2, FIFA in a World Cup year” and Crysis.