It may have been Q4 for most folks, but the 2004 holiday season was the third quarter of Electronic Arts' 2005 fiscal year. As befits its number-one ranking among third-party publishers, the company was today the first major publisher to announce its earnings for last year's all-important shopping season.

Overall, EA saw its sales drop 3.2 percent for the quarter ending December 31, 2004. According to the company, net quarterly revenue was $1.43 billion, down from $1.48 billion during the same period in 2003. After subtracting amortization, stock options, and other assorted charges, EA earned $390.63 million, some $1.23 per share. By comparison, it earned $393.16 million--$1.26 a share--during the same quarter in 2003.

By region, net revenue for the quarter sunk 8 percent in North America to $692 million. Across the Atlantic, European earnings rose 1 percent to $666 million. In the Asia-Pacific market--which includes Japan--earnings were up 9 percent to $70 million.

In regard to specific titles, EA proudly announced that Need for Speed Underground 2 sold more than 8.4 million copies worldwide in 2004, despite being released on November 9. The impressive tally helped the Need for Speed franchise's total earnings surpass $1 billion less than 10 years after it was established in 1995. Other holiday retail milestones EA chose to highlight were FIFA 2005 selling more than 4.5 million copies worldwide and The Sims franchise moving more than 16 million units.

While EA's overall earnings were superficially disappointing, they were above the expectations of analysts, who predicted the one-two punch of Microsoft's Halo 2 and Take-Two Interactive's Grand Theft Auto: San Andreas would put a bigger dent in the publisher's bottom line. Combined with EA's twin exclusivity deals with the NFL and ESPN, the earnings report caused the company's share price to go up over $2--nearly 4 percent--in after-hours trading.

Naturally, EA executives put a positive spin on the numbers. "This quarter, EA further strengthened its long-term leadership position," said EA chairman and CEO Larry Probst. "Our exclusive agreements with the NFL, NFLPA, and ESPN, along with our strategic investment in Ubisoft, will help provide the framework for continued growth in the future."

Indeed, EA's purchase of much of Ubisoft's stock was the subject of some debate in the post-earnings conference call with analysts. First, CFO Warren Jenson outlined the exact terms of the deal, in which EA purchased approximately 19.9 percent of Ubisoft for a price of 19.69 euros ($21.92) per share--approximately $90 million in total. He then addressed speculation that EA may decide to take over its French rival. "First, we want to keep all of our options open," he said. "We think this is a good investment. We think this is an investment that stands on its own, and we are prepared to be a long-term minority shareholder."

That said, Jenson would not rule out an EA takeover of Ubisoft. "We could seek a controlling interest," he said. "It is also possible that we could sell our shares." However, the CFO did try to dispel comments from Ubisoft executives that the stock purchase was a "hostile" act, saying, "We expect that if anything were to happen, it would happen with the full cooperation of Ubisoft."

But just because EA isn't taking over Ubisoft anytime soon doesn't mean the mammoth publisher--whose behavior some analysts have dubbed "predatory"--has stopped its ongoing run of purchasing independent developers. "We expect to have acquisition opportunities," Jenson said. "In this respect, we are not in any hurry. We don't intend to alter the discipline of our acquisition screening. That said, we do believe there will be opportunities and we expect to be active participants."

Looking forward, EA says it expects net revenue for the full fiscal year ending March 30, 2005, to be between $3.275 billion and $3.325 billion, compared with $2.957 billion for fiscal 2004.