Leading video game publisher Electronic Arts (ERTS) warned last night that its fiscal third and fourth quarters -- which end December 31 and March 31, respectively -- will be "well below" previous company and analyst estimates. "Holiday sales are not meeting expectations," Larry Probst, EA's chairman and CEO said. "For the December quarter, it is likely the industry will be down double digits on a percentage basis."
Note Probst indicates the problem is not specific to ERTS, but rather should plague other gaming publishers like Activision (NASDAQ:ATVI) and THQ (THQI) as well. Indeed, Activision also warned last week.
The sharp downturn is due to consumers holding of on game purchases while the next generation of consoles from Microsoft, Sony and Nintendo are rolling out. So will there be a bounce-back next year? ERTS CFO Warren Jensen: "The demand curve has shifted abruptly... We have no reason to believe this abrupt shift in demand will reverse itself." Ouch.
ERTS stock is off about 3.5% in the pre-market today on the news. Seeking Alpha contributor Eddie Elfenbein laments that "ERTS used to be a 'can’t miss' stock." Those days are seemingly behind us. And if the third generation of consoles and games don't live up to expectations, more dire predictions of the gaming industry's collapse may prove prescient.
ERTS 2-yr chart:
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