Electronic Arts Beats Expectations, Shares Drop on Weak Guidance

Electronic Arts Inc. said Tuesday afternoon it lost $25 million ($0.08/share) in its FQ4, outdoing last year's $16 million ($0.05) loss. But excluding items, the company made $0.06/share, triple the $0.02 analysts expected. Revenue was flat at $613 million; analysts were calling for $585 million. The world's #1 video game publisher said profits in the coming year may fall short of analyst expectations: It expects to lose $0.50-0.66/share in FQ1 2008 ($0.34-0.40 after items) on revenue of $330 million. It expects to lose $0.23-0.77 on the year, and to earn $0.90-1.20 after items. Analysts had been looking for a Q1 loss of only $0.09 and a full year profit of $1.34. Janco Partners analyst Mike Hickey notes EA is prone to under-promise and over-deliver. In its conference call, CEO John S. Riccitiello said the company was redirecting its focus towards improving execution and predictability: "EA is blessed with a team that is unmatched in creativity and professionalism. Our intent is to lead this team to deliver on our obligations to our consumers and our shareholders." Shares gained 3% during regular trading and gave it all back after-hours.

Sources: Electronic Arts F4Q07 Earnings Call Transcript, MarketWatch, Bloomberg
Commentary: Profiting From the Love of Gaming • Will Electronic Arts Benefit From Expanding Its Nintendo's Wii Lineup? • Electronic Arts Is A Compelling Play - Barron's • PC Games Making a Comeback
Stocks/ETFs to watch: Electronic Arts Inc. (ERTS). Competitors: Activision Inc. (ATVI), TakeTwo Interactive Software Inc. (TTWO), THQ Inc. (THQI). ETFs: iShares Goldman Sachs Software Index Fund (IGV)

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