Buoyed by games like Lord of the Rings: The Two Towers and Madden
N.F.L. 2003, Electronic Arts today reported earnings that far exceeded Wall
Street’s expectations, showing continued dominance in the video game industry.
Electronic Arts said that in its third quarter, which ended in
December, 11 of its games sold more than a million copies each, a remarkable result
in a business where any game that sells more than 750,000 copies is considered
a major hit.

Electronic Arts posted revenue of $1.23 billion for the quarter, compared with
the $1.13 billion average estimate of Wall Street analysts. The company reported
net earnings of $250 million, an 89 percent increase
over the year-earlier period. Earnings per share were $1.69, compared with analysts’
estimate of $1.57. . .

But the positive news was tempered by the lower-than-expected performance of
the Sims Online, an online cyberworld that Electronic Arts brought
out last month. Industry analysts and Electronic Arts pinned big hopes on the
game as a growth market and a bellwether of consumer acceptance of online game
playing in general.

The game has attracted 82,000 registered players, who pay $9.95 a month, which
is “behind where we thought we’d be,” said Warren C. Jenson,
the company’s chief financial and administrative officer. He did not say what
the company’s expectations had been.

Suggesting that the company has growth plans beyond the Sims, Electronic Arts
also announced today that it had filed with the Securities Exchange Commission
for a universal shelf registration — a regulatory requirement when a company
intends to take out a line of credit, and that is generally intended to pave
the way for a company to borrow to make acquisitions. Electronic Arts said it
intended to borrow $2 billion.

The sizable amount of the line of credit suggests that Electronic Arts may
be seeking to buy a major competitor, like the game unit of Sega
or Vivendi Universal Games, said Edward Williams, an analyst
with Gerard Klauer Mattison.

Industry analysts have speculated that Electronic Arts is competing with Microsoft
to acquire Vivendi’s game unit. Jeff Brown, a spokesman for Electronic Arts,
declined to comment on that speculation.

“I think they want a piece of Vivendi; I think they want Blizzard,”
said Mr. Williams, the analyst. Blizzard Entertainment is part of Vivendi Universal
Games.

The company had a huge quarter, bolstered by holiday sales, said Shawn Milne,
an analyst with the Soundview Technology Corporation. “They blew away the
numbers.”

The company’s profit margins hit 55 percent, compared with 52 percent in the
quarter last year.

The success is not a surprise in at least one respect. The video game industry
is heavily cyclical, with growth when new video game platforms are released.
The market is flush with new platforms, like the Sony PlayStation 2, the Nintendo
GameCube and Microsoft’s Xbox, paving the way for big sales.

Electronic Arts closed at $50.97 in regular trading before its earnings announcement,
up 20 cents. It fell as low as $48.87 in after-hours trading.

News Source: New
York Times.

Filed under: News

Like this post? Subscribe to my RSS feed and get loads more!