EA's quarterly profits fall 31 percent

[UPDATE] Megapublisher reports Q4 2005 net income is down $116 million; names Sims 2, Need for Speed as top sellers; claims 70 percent sports-game market share.

When Electronic Arts announced yesterday it was laying off 5 percent of its worldwide workforce--around 350 people--cynical observers saw it as a preemptive strike to a lackluster earnings report. As a rule, news of layoffs at an ailing company shows stockholders that said company is taking action to cut costs and shores up the stock price.

Whether the layoffs propped up EA's stock is debatable, as its share price lost over 2 percent of its value, $1.18. Trading was heavy indeed--twice normal volume, in fact, with 7.3 million shares changing hands. And no wonder: Shortly after the US markets closed, EA announced its earnings for its third fiscal quarter, which ran from October to December 2005. Besides being of great import to stockholders in the world's biggest third-party publisher, the report was seen by many as being a bellwether of the game industry's overall health.

Most analysts had predicted EA to have quarterly earnings of $1.26 billion, or 90 cents a share--pretty close to the actual numbers. For the quarter ending December 31, 2005, the publisher saw $1.27 billion in sales, $160 million less--or 11 percent below--the $1.43 billion it enjoyed during the same period in 2004. However, EA's $0.83 per-share earnings were below analysts estimates and far below the $1.18 per-share earnings the year before.

EA's net income for the quarter saw an even steeper year-on-year decline. The company's profits were slashed by nearly a third, going from $375 million in calendar Q4 2004 to $259 million in calendar Q4 2005--a drop of $116 million. Part of that shortcoming was due to the publisher's December purchase of mobile-game-maker Jamdat in a deal valued at $680 million.

Still, EA tried to put a brave face on things. "We ended 2005 in a very strong competitive position," said CEO Larry Probst in a statement. "We were number one on the PlayStation 2, the Xbox, PSP, and PC in both North America and Europe. We also had a successful launch on the Xbox 360 and expect that we will be the number one publisher on this platform in 2006."

In a press release, EA also played up its successes during the quarter. Five titles--NBA Live 06, SSX on Tour, Tiger Woods PGA Tour 06, From Russia With Love, and Battlefield 2: Modern Combat--all sold more than 1 million units during the quarter. Five more--Need for Speed Most Wanted, FIFA 06, Harry Potter and the Goblet of Fire, The Sims 2, and Madden NFL 06--sold more than 2 million copies during the all-important holiday quarter. As of the end of 2005, Madden NFL 06 had sold nearly 5.5 million copies on all platforms in the US, and Need for Speed Most Wanted had sold more than 7 million, counting international sales.

EA also played up the fact that it still has the biggest slice of the game-market pie. The company touted its overall 22 percent revenue share in North America and 23 percent revenue share in Europe.

[UPDATE] In a conference call after the earnings report was issued, EA chief financial officer Warren Jenson broke down EA's dominant market share on several platforms. "EA was the number one publisher on PS2, Xbox, and PC in North America and in Europe," said Jenson. "Specifically on the PSP we ended the year with 31 percent revenue share in North America and we estimate 25 percent in Europe." The company also claimed to hold 30 percent of the Xbox 360 market in North America and 24 percent in Europe.

Another big factor in EA's earnings was sports. "In sports we had 70 percent category share on consoles in North America," Jenson told analysts. "We had 15 of the top 20 sports titles on the PS2 and 14 on both the Xbox and PC." He also said the company's latest sports title, NCAA 2006 MVP Baseball, had sold more than 200,000 copies in its first two weeks at retail.

As far as guidance is concerned, EA said it expects net revenue for the current quarter, ending March 31, to be between $550 and $600 million. It predicted per-share earnings to be between $0.06 and $0.14. The quarter will see the release of three of EA's most anticipated games of 2006--The Godfather, Black, and Fight Night Round 3.

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Discussion

163 comments
arjnav
arjnav

you cant blame the employees. at the rate their expected to churn out sequels (every year!) it's no wonder people stop buying their games. who honestly wants to spend 50-150+ bucks buying yearly sequels with almost no difference in them?!

Mehfuz
Mehfuz

I thought they are the biggest game company today so why their profit is decresing

jaefrmbk2k
jaefrmbk2k

hey, isn't it funny how when to try to get on gamespot the stupid razor ad locks you out of the site indefinately? good thing i'm samrt i faound a workaraound

f00tball1o1
f00tball1o1

Yeah, EA pulled a Bill Gates. They gained control of the market then released crappy products. And they will probably do it again this year. We as consumers have to set the standard by not buying their games this year.

electrikALIEN
electrikALIEN

I never fully realized how much of a hold EA has on so many franchises. Apparently they want to own a lot more. I expect to see more company buyouts added into EA's arsenel. I fear what this company is doing and has done to American gaming culture.

chrisdojo
chrisdojo

the tower is crumbling!!!!!!

hi-ai
hi-ai

I hate EA in some areas. I love the Burnout series and I played the demo of Black (which is being made by the people of Burnout), and that shows some promise. I hated the fact they bought the NFL licences like greedy bastards, but I like the fact that other companies have to improvise like they did with Blitz: the league. Even though that was a pretty dumb game. I'm also pissed at Marvel as well. They trusted EA to make an awsome Marvel fighting game with some new charaters and gave up the awesome innovative might of CAPCOM. Also the fact when they made the lord of the rings games they wanted no input from Peter Jackson. Which is why EA's competitor UBI soft got in on the awsome King Kong game. I have know idea where i'm going with this, but they need to stop slacking off so much when making games and really stop and think of what makes a game fun. I'm tired of all the god damn movie games they make. All they do is flop together a crappy game and sell it for whatever cash possible. Mabe thats why they got sued by their workers, by working them overtime and making them make a crappy catwomen game. (FYI, I didn't buy that movie game didn't even think about buying it, don't even like catwomen)

cg7879
cg7879

deadchicken: 2 very good points. It's easy to complain about how someone does something when you aren't the person making the decisions. People (including me) have said it a gazillion times: If you don't like a company's products, THEN DON'T BUY THEM!!!! SImple as that. Yes, I realize I just wasted my effort but whatever. Hopefully, someone will get the point. Eventually. Maybe. I doubt it though. Also, I wonder how many of you "gamers", and I use that term loosely, would have such a problem with EA if they only made games for the almighty Xbox and Xbox 360? Probably not too many.

deadchicken
deadchicken

Modder huh? So you take someone else's hard work and long hours spent, make a few minor changes, then slap your name on it and sleep soundly in the comfort of being 'original'. When you own your own business, have employee's to pay and customers to satisfy, then you can complain all you want about EA and how it runs its business.

Gorge-a-Maniac
Gorge-a-Maniac

Well Deadchicken, ever thought that some of us are MODDERS who HAVE original ideas? Just cause we're not official industry developers doesnt mean we're not aiming to be.

Gorge-a-Maniac
Gorge-a-Maniac

EA friggin SUCKS - plain and simple. No imagination, nothing which makes you go 'wow'. just all plain boring same ol' CRAP

deadchicken
deadchicken

For all the Talk I read on this forum I don't see any of you making Video games. You say that EA has no Original ideas? Where are yours?

GunslingerMan
GunslingerMan

Ravenmyst ; I do have a life, EA din't make Bf2, and the reason some of there sports game are best sellers is because people like you called casuals keep buying there crap .

GunslingerMan
GunslingerMan

wOOT next they will hopefully go on debt !!!!

regulesblade
regulesblade

I think it is their fault since they buy out companies and then they just don't make games from those companies

negativeions
negativeions

[This message was deleted at the request of a moderator or administrator]

brightski
brightski

They lost money because they were buying alot of companies out. They spent a crap load of money to better their company and make it more diverse, so its not that their games arent doing good, its that they're (EA) is spending so much money on other companies to expand they're company

cichy69
cichy69

EA doesn't put soul in their games, which feel 'empty' .. after time people realize that the game sucks.. no offense :] ...they should put more 'quality' in games instead of making all types of games that are boring

moozeditty
moozeditty

Hopefully the fine artists and programmers and such of EA will easily find jobs with other, better companies. We may yet see the return of creativity in games. But I'm probably just being overly optimistic.

ZeTecThreaT
ZeTecThreaT

In the words of Busta Rhymes "Keep Fallin!!"

XlpranksterlX
XlpranksterlX

Everyone was excpecting this, after it laid off over 300 people.

PapaJohn24
PapaJohn24

Yes!!!! They couldn't make a game if their lives depended on it. Way too many movie games, and they all sucked. EA will ruin the masterpeice that is the Godfather. EA's Canada branch was the only good branch. They created the Need For Speed Underground Series and the NHL series.

PazUSA
PazUSA

Wow - it's great to see people expressing their displeasure with EA...I love it and wish somehow we could all find out who sits on the board at EA and email them all these comments. I don't wish ill on the developers who lost their jobs, but man oh man, did this company have it coming to them

advent6
advent6

Really Nice! Pay off all of the Leagues to gain exclusive rights and then layoff some employees. This company is so screwed up. I hope they burn in hell as well! This is corporations at their best. Pay out millions to gain market share and then layoff the little people who are trying to make a living and raise their families. It is all ok though. EA will eventually contract these people's jobs out to people in India or China to save some money :(

CheeseRa
CheeseRa

Good riddance. I hope EA burns in hell.

SorcererLance
SorcererLance

look at it this way, at least 350 people are free from their chains

SorcererLance
SorcererLance

look at it this way, at least 350 people are free from their chains

Kounji
Kounji

And also so I can sound a bit credible here. They more or less have done nothing with their movie franchises that are remotely good. I mean what ever studio it is that they hand the movie game titles to need s to get shot. I don't know if anyone even realizes this when they say movie games suck. A majority of these games come from EA its really sad. Especially since they never give the developers time to fix any of their bugs because of the insane development turn around. The average movie game from what I can descern ttakes a bout 2 1/2 years to make it seems like they spend so little time on them. A game really should take about 4 years to make. If anyone has ever noticed most good games take about that long. It just proves you can't stifle creativity. EA seems to believe in really quick turn around times which results in a game with a few updated features an updated roster and marginally better graphics. I think this is what happened with most of their x box 360 titles. They snuck in some sweat made players a bit glossier found used what ever the dev kits default lighting software was and just mocked up a port. That's right a port. Although i can't harp on them too much because ms probably pushed them to come out with a nice launch title or a set of launch titles.

Kounji
Kounji

I agree with TommyD100 Basically EA, Ubisoft, and Activision and maybe even Atari(formerly Infogrames) are indicative of the industry. In the case of EA and UBisoft when they aren't doing well that indicates to big investment companies that gaming isn't doing well and as such they won't invest in other public game publishers. THis is the way things work in all other industries people look to the leaders for industry growth and if they aren't doing well then usually that's a sign the industry isn't doing well. In this case though ea is reporting that they have 31 percent less profit margin then they originially proejected that's cause growth has slowed. I think they could fix this in a number of different ways. Probably one of the best would be to sell good games during other parts of the year.. summer is good because most people in the 17-21 demographic aren't in school and have summer jobs usually who can spend money on games. Like they were smart to come out with Battlefield 2 when they did cause everyone I knew was playing that. They need to flood more games during that time if you ask me. Also it would be great if they set some revenue aside for gaming research like if they set aside one studio for innovative games and just stepped away from properties as a whole for just that one studio. That way all the rehases that people do seem to like (even if we don't) can fundEA's creative or innovation studio. right now its like they have one studio that does metal of honor. one that does the nfl madden games and their ncaa games another that does their basket ball games. Then they have one that does battlefield and one that does their extreme games ( EA Big which is my favorite studio by far) But I would like to see them invest more in innovative titles it would be a surprise.. and then they would of course rehash the hell out of it. I mean they could do what bioware does with obsidian which is make the original and then pass the sequels off to a trusted company. There is a lot of things ea could do. To come off as being more credible to the hardcore.

Zauster
Zauster

cube 35 obviously you have not played a 2k sports game they are far superior and just are more fun.... also they will not go bankrupt any time soon if anything they will continue to buy more companies to make more crappy games then by the time my kids play games hopefully they wont be around :D

lageasy311
lageasy311

mr.imkeit that was a funy post (read the first post on the first page tos ee what im talking about.) Ea sux and needs to back away from ubisoft. Furthermore they need to just make burnout games cuz that's all that's worth buying. Even then i stole this game just to stick it to the man.

cube35
cube35

All of you people who think EA sucks and hoping they go bankrupt you are a bunch of idiots. Of course there profit for the quarter was going to be low it says in the article partcially because of the purchase of jamdat. There would be no way possible for EA to go bankrupt they would need to lose several billion dollars to go bankrupt so unless absolutely everyone stops buying their games it will not happen. Anyone who thinks 2k sports is better you are morons, and anyone sick of madden you're not a real sports fan. Enough said.

VolcanoMan001
VolcanoMan001

I have an idea for my fellow gamers that do not want to live in a future where all games are vanilla created by EA. Do what I do, when that new EA game comes out that you just MUST buy, wait until it is available used at EB Games or Gamestop. I dont mind waiting the extra month or so... this way they dont get one cent of mine. Of course someone out there will have to do the new purchasing for this to function, and I leave this to the EA fanny boys.

Nomikal
Nomikal

AHAHAH...EA taking loses...Yes, I love it...Corporations are teh devil. Good developers under them, but it's not going to result in much if they're under the control of a profit seeking corporation...Best games are made indepedently.

objectivegamer
objectivegamer

I'm with most of you guys, I ***hate*** EA. THE COMPANY STIFLES CREATIVITY ACROSS THE INDUSTRY. Granted EA has some good games (BF2 in particular) but EA treats gamers like a bunch of suckers, with rehashes of sports games and mediocre movie games (harry potter, lord of the rings). I almost root for any game company not named EA (Ubisoft, Taketwo, NCSoft, etc.). EA had it coming.

fmcuk
fmcuk

That's what you get for releasing crappy sequels of the same game you just played last year. Be it football, basketball, soccer or those "look-at-me-I'm-cool" racing games, they are the same krap. While few of their games are good, the rest of them sell because there is no other thing on the market (Madden), or they are just flashy, graphics-over-content trash (Need for Speed). I think EA has to change its name from Electronic Arts to Electronic Annoyance....

PazUSA
PazUSA

WAIT...newsflash....EA has just announced a new title released today for all current, next gen and antiquated systems including N64 and Dreamcast: NFL Superbowl 2006, a feature stripped, cashcow titlle that features almost up-to-date rosters for the Pittsburgh Steelers and Seattle Seahawks ONLY. The title has NO online capability but does feature John Madden and ESPN logos. CEO Larry Probst denied this is another way to squeeze blood out of a lame franchise and urged gamers to "Buy, Buy, Buy" to help out EA's poor impoverished shareholders.

brightboy
brightboy

ea games don't suck. they have many great games like Need for Speed, Madden, Live and there many fps army gaems. And I bet that almost everyone who play video games has at least one games made by EA.

Curly21029
Curly21029

I'm happy EA is getting what they deserve. My only fear is that they will lay off even MORE employees. (it's not their fault that the company has been in a crap direction) They do have a few good franchises like Burnout and Timesplitters, but their constant rehashing is absolute BS and I have no idea why people stand for it. Oh, and f*ck EA for not properly promoting great titles like Oddworld: Stranger's Wrath. If you don't want to back a product, don't glut the liscense.

ShockG707
ShockG707

EA = Canada...nuff said AHAHAHAHAHAHA!!

skitzocyko
skitzocyko

That is what you get for trying to horde all the business. EA SUXXX!!!

Reetesh
Reetesh

trying to Buy out all those Companies and stuff Finally Proved too much for them maybe, That Should teach them that Healthy Competition should be taken Head on and not ELiminated By buying em out:|

valdarez
valdarez

After EA gained exclusive rights to the NFL franchise, effectively killing the 2k5 series, I have tried to avoid EA games whenever I can. They obviously do not have the gamer in mind when they create their games and form their business relationships. At some point, their lust for money, instead of excellence, will come back to haunt them.

PazUSA
PazUSA

EA does deserve this - not the poor folks who lose their jobs (and I sincerely wish them well)...EA's credo is maximizing revenues year after year with minimal investment in new game development. They just signed tiger Woods for another SIX YEARS!!!!!!! How unispiring is that? How boring and predictable is that? What can you REALLY do that is innovative and revolutionary with a golf tilte that you will re-release year after year? Same thing with all this NFL Street and Fifa Street nonsense. Those are not good games in my opinion.That lack of creativity coupled with really subpar releases for 360 this year are why I HATE EA!

Igiss
Igiss

Great. EA really deserves it. If they don't improve their games, they'd better lose some 135% next year.

TTS_Fusion
TTS_Fusion

Remember, grammar is very essential!