Electronic Arts Inc. swung to a loss in its fiscal first quarter as the world’s largest video-game maker was pressured by increased competition that caused revenue to shrink 16 percent.
In its report Tuesday, the company also lowered its full-year sales and profit outlook after announcing that it would delay the release of a highly anticipated game based on the 1970s-era “The Godfather” films.
For the three months ended June 30, Electronic Arts lost $58 million, or 19 cents per share, down from a profit of $24 million, or 8 cents per share, a year ago. Excluding charges such as amortization, employee stock-based compensation and restructuring, the Redwood City, Calif.-based company lost $55 million compared to net income of $25 million for the year-ago quarter.
Revenue fell to $365 million, down from $432 million in the prior year.
Still, the results were slightly better than analysts anticipated. The mean estimate of analysts polled by Thomson Financial was for a loss of 24 cents per share on sales of $326.8 million.
The company makes popular sports and action games, including “Tiger Woods PGA Tour,” “Madden NFL Football” and “GoldenEye: Rogue Agent.”
It’s the second consecutive quarter that Electronic Arts has had little good news to report. In the company’s quarter ended in March, profits plunged 91 percent on sluggish sales.
“The issue is that this normally rock solid company has stumbled this year,” said P.J. McNealy, a senior analyst with American Technology Research. “When a company misses expectations in a quarter and then lowers their forecast for the year ... it just doesn’t inspire overwhelming confidence.”
For the year, the company expects to earn $1.45 to $1.60 a share, below Wall Street’s forecast of $1.63. Electronic Arts also lowered its revenue expectations for the year to between $3.3 billion and $3.4 billion. Analysts had expected the company to see sales of about $3.41 billion.
At a time when licensing fee costs are rising, Electronic Arts’ troubles can be traced to the many fans who are awaiting the upcoming launch of new playing consoles, such as Microsoft’s Xbox 360, McNealy said.
Much of why the company lowered expectations was blamed on the delay of the company’s “Godfather” game, which is expected to be a top seller, analysts say. Two weeks ago, Electronic Arts said it would begin shipping “The Godfather” in the fourth quarter instead of the third.
“It was not quite ready,” Warren Jenson, Electronic Arts’ chief financial and administrative officer, said Tuesday. “We believe this is a long-term franchise and we believe in the (development) team and that’s the call we made.”
