Video game software developer Electronic Arts Inc. (ERTS) is scheduled to announce second-quarter results after the market closes on Monday. The Redwood City, California-based company's software and content are playable on various consumer platforms, such as video game consoles, personal computers, handheld game players and wireless devices like cellular and smart phones. The company develops and markets a portfolio of games under the EA brand and also provides a collection of sports-based video games.
When the video game publisher releases results later in the day, on average, 26 analysts polled by Thomson Reuters expect the company to earn $0.07 per share for the quarter, with estimates ranging between a loss of $0.05 per share and a profit of $0.23 per share. Revenues are estimated to be about $1.13 billion. Analysts' estimates typically exclude special items.
On September 16, FBR Capital Markets lowered its second quarter pro forma per share estimate to a loss of $0.02 on revenue of $1.1 billion from a profit of $0.07 on revenue of $1.2 billion. According to the firm, the lowering was in an effort to balance the strength of Rock Band and the potential NFS improvement with the weakness in Madden and NCAA, along with two months of weaker-than-expected industry sales.
For the second quarter of the previous fiscal year, the company's net loss was $310 million and loss per share was $0.97. Net revenue for the quarter was $894 million. The company noted that sales were driven by the launches of Madden NFL 09, SPORE, Mercenaries 2: World in Flames NCAA Football 09, Tiger Woods PGA TOUR 09, Warhammer Online: Age of Reckoning, as well as the continued strength of Rock Band.
The video game industry is becoming highly competitive, and companies are trying to own as many franchises as possible either through acquisition or tie ups. The ongoing economic crisis, which has caused a sharp pull back in consumer spending, is putting further pressure on video game publishers. Feeling the pinch of the economic downturn, Electronic Arts said in February that it would reduce workforce by about 11% or 1,100 people, close 12 facilities, narrow its product portfolio and cut other variable costs.
The company said in August that its first quarter loss widened from last year, as revenue dropped mainly because of revenue deferral related to certain online-enabled packaged goods games and digital content. The company reported a GAAP net loss for the first quarter of $234 million or $0.72 per share, compared to a GAAP net loss of $95 million or $0.30 per share for the year-ago quarter. GAAP net revenue for the first quarter, which includes the impact of deferred revenue adjustments, fell 20% to $644 million from $804 million in the year-ago quarter.
While announcing the first-quarter results, the company revised its fiscal 2010 GAAP loss forecast to a range of $0.85 to $1.35 per share from its prior guidance of a loss of $0.85 to $1.45 per share. EA also affirmed its fiscal 2010 non-GAAP earnings guidance of about $1.00 per share. The company is likely to update this outlook today.
Early last month, the company announced the launch of EA SPORTS FIFA 10, which was an instant hit. With 1.7 million copies sold through at European retail in the first week, the game is the fastest selling sports game ever and EA's biggest European launch in history, the company said. It added that FIFA 10 is presently the highest rated sports video game ever on PLAYSTATION 3 and Xbox 360 with review scores of 92 and 91, respectively.
Last week, Activision Blizzard Inc. (ATVI), the world's largest video-game publisher, reported a profit for the third quarter, benefited mainly by strong response to its Guitar Hero 5, Marvel: Ultimate Alliance 2, and the Guitar Hero and Call of Duty franchises, as well as Blizzard Entertainment's World of Warcraft. The company posted GAAP net income of $15 million or $0.01 per share for the third quarter, compared to a loss of $108 million or $0.08 per share in the year-ago period. Activision Blizzard's GAAP net revenue for the quarter was $703 million, and its non-GAAP net revenue was $755 million.
ERTS closed Friday's regular trade at $19.00, up $0.84 or 4.63%, on 11.03 million shares. For the past year, the stock traded in the range of $14.24-$23.95.
In September, analyst Heath Terry of FBR Capital Markets upgraded shares of Electronic Arts to "Outperform" from "Market Perform", and lowered its price target to $22 from $23. While acknowledging that the concerns over weakness in EA's football business, near-term costs, and the likelihood of the company meeting its $1.00 FY10 pro forma EPS guidance were well founded, due to factors such as an improving industry backdrop and a stronger release schedule, the brokerage raised its rating to "Outperform" and expect that the stock could return to the $20 to $22 level by year-end.
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