EA Earnings: Rinse, Wash, Repeat
From the Orlando Sentinel(thanks Kwadwo):Electronic Arts Inc., the world's biggest video-game maker, on Wednesday posted a fourth-quarter loss after it acquired Jamdat Mobile Inc., and said sales this quarter will miss analysts' average estimate.
The loss of $16 million, or 5 cents a share, compares with net income of $8 million, or 2 cents, a year ago. Sales rose 16 percent to $641 million, the Redwood City, Calif.-based company said.
Delays in the release of new consoles roiled the shipping schedule for new games, Chief Financial Officer Warren Jenson said in an interview.
..."The Street underestimated how punishing this transition has been on all the publishers," said Mike Hickey, an analyst with Janco Partners Inc. who doesn't own the shares and rates them "sell." "This is a huge, huge miss."
...The company forecast sales this quarter of $300 million to $340 million and a loss excluding some costs of 22 cents to 28 cents a share. That compares with average estimates of $411.9 million in revenue and a loss of 19 cents by analysts surveyed by Thomson Financial.
For the fiscal year ending in March 2007, results excluding certain costs will range from a loss of 15 cents a share to a profit of 15 cents, Electronic Arts said. Revenue will be $2.7 billion to $2.95 billion, below analysts' $3.12 billion average estimate in a Thomson survey.
I bolded some of the tasty stuff.
The thing about EA is that it's never responsible for its own problems, is it? There's always someone else to blame. Quarter after quarter after quarter.
The word that EA doesn't want to use is "erosion," but I think that's what's happening. They're a growth company that's no longer growing. They're a premier game company that's making very few premier games. Revising next quarter revenue estimates downward by 15-25% is a huge change. Revising fiscal year (ending March 2007) estimates downward by ten percent is another big miss.
One more thing: their profit estimate for the fiscal year ending in March 2007 is in a range from a fifteen cent loss to a fifteen cent profit, which is a remarkably wide range--actually, that's a giant range. But they slipped in the phrase "excluding certain costs." What? In other words, that earnings estimate essentially means nothing. They don't know what's going to happen.
For several years, EA was a company that didn't make great games but managed successfully to the bottom line. Now they're badly managed as well. I think they were able to successfully hide these problems for a while through the acquisition of premium developers who turned out enough big hits to obscure their internal issues. It's not unlike a big city where beautiful suburbs are being built as downtown decays. At some point, though, the urban blight becomes so obvious that it can't be ignored.
I'm also starting to wonder about Spore. Not in a business sense, mind you--I just want to play the game. I couldn't imagine it slipping into 2007, but now I'm starting to wonder, because of EA's downward revision of their fiscal year revenue. And if the company thought the game was shipping this fall, I think they would have mentioned it in the conference call.
Man, I hope I'm wrong.
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