Electronic Arts Forecasts Weaker Profit in 2009

The company said it had lowered its projections because of changes in the behavior of consumers and retailers.
Click here for readmore.......

Electronic Arts said consumers appeared to be buying a few hit games, rather than spreading out their spending. That has hurt Electronic Arts, which had only one game — the space epic Dead Space — among the 10 best sellers in October, according to NPD, a market research firm.

At the same time, some retailers are cutting back on video game inventory and also focusing on the hits, according to John Riccitiello, chief executive of Electronic Arts, which is based in Redwood City, Calif.

Mr. Riccitiello argued that the quality of games at Electronic Arts had been on the rise, but that the market was not buying them.

“Our lead titles are not selling through as much as we’d hoped,” he said, adding that the narrowed appetite from some major retailers was aggravating the problem: “Retailers are trying to expend less cash and end up with less inventory.”

This is the second time Electronic Arts has lowered its forecast in the last six weeks. On Oct. 30, it estimated that for its 2009 fiscal year, which ends in March, it would have sales of $5 billion to $5.3 billion and earnings of $1 to $1.40 a share.

That profit estimate was down from an earlier projection of $1.30 to $1.70 a share.

On Tuesday, Electronic Arts declined to provide investors with new figures, other than to say they would fall below the earlier forecast. That would give Electronic Arts lower profit than in fiscal 2008, when it earned $1.06 a share, said Evan Wilson, an industry analyst with Pacific Crest Securities.

That would be considered a sharp blow in an industry that, over all, has been in the middle of a growth cycle.

While Electronic Arts continues to have strong sports titles, like Madden football, it has struggled to develop new hit games.

Shares of Electronic Arts closed Tuesday at $19.35, down 11.5 percent, and fell another 9.9 percent after hours.

Electronic Arts said Tuesday that it planned to reduce the number of games it makes and sells, and would focus on those with the biggest hit potential as well as games with an online component.