Video-game maker Electronic Arts (ERTS), Monday cautioned that its fiscal year 2010 earnings would be below the financial guidance provided earlier. The company cited weakness for EA and the overall packaged goods sector in Europe during December, and a product mix shift to lower margin distribution products in the December quarter, primarily in North America.
The company also said it currently expects recording a loss in the third quarter.
Even after managing to ride much ahead of its competitors in the video game business, Redwood City, California -based Electronic Arts has been embarrassed for a while finding itself floating in a pool of losses hurt by reasons including revenue deferral related to certain online-enabled packaged goods games and digital content. In the first quarter, the company reported a loss of $234 million or $0.72 per share, the loss become $391 million or $1.21 per share by the time company published its second quarter results.
And now for the third quarter, the company said it expects a loss in the range of $0.24 to $0.32 per share and non-GAAP earnings in the range of $0.29 to $0.33 per share. Non-GAAP earnings excludes change in deferred net revenue, stock-based compensation, restructuring charges and other expenses.
On average, twenty-nine analysts polled by Thomson Reuters currently expect earnings of $0.56 per share for the quarter. Analysts' estimate typically excludes one-time items.
Revenues for the quarter are expected to range between $1.227 billion and $1.247 billion, while, on a non-GAAP basis, revenues are expected to be between $1.33 billion and $1.35 billion. The Street currently expect revenues of $1.42 billion for the quarter.
Excluding the impact of tax-related charges that may arise in connection with the Playfish integration, the company now expects fiscal year 2010 loss in the range of $1.94 to $2.24 per share, compared to the prior range loss of $1.20 to $2.05 per share.
The company acquired Playfish, a creator of social network games, for about $275 million in cash and $25 million in equity retention arrangements. In addition, the sellers are entitled to additional variable cash consideration, up to a maximum of US$100 million, contingent upon the achievement of certain performance milestones through December 31, 2011. Non-GAAP earnings for 2010 are expected to be in the range of $0.40 to $0.55 per share, compared to the prior-range of $0.70 to $1.00 per share. Analysts' currently expect the company to earn $0.79 per share for the year.
Net revenue for the fiscal year is now expected to range between $3.6 billion and $3.675 billion, compared to the prior range of $3.6 billion to $3.9 billion. Non-GAAP net revenue is expected to be $4.125 billion to $4.2 billion in fiscal year 2010 versus prior guidance of $4.2 billion to $4.4 billion. The Street expects revenues of $4.26 billion for the year.
In an effort to pitch the company out of the lean patch, EA has also come up with several counter measures including that of the closure of several facilities and to cut about 1500 jobs to narrow its product portfolio and provide greater focus on titles with higher margin opportunities.
The actions, the majority of which will be completed by March 31, 2010, will result in annual cost savings of at least $100 million and restructuring charges of $130 to $150 million, the company said.
Electronic Arts had said in February that it would reduce workforce by about 1,100 people, close 12 facilities, narrow its product portfolio and cut other variable costs.
ERTS closed Monday's regular trading at $8.27, down $0.13 or 0.71%, on a volume of 5.88 million shares. In after-hours, the stock further dropped $1.69 or 9.25%, to trade at $16.60. In the last 52-week period, the stock traded in the range of $14.24 to $23.76, with a three-month average volume of 7.31 million shares.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.