EA sees $16 million quarterly loss, annual revenue decline

Price drops, one-time tax charge wipe out number one third-party publisher's quarterly income; Jamdat acquisition cuts into yearly revenue of $2.95 billion.

By Tor Thorsen, GameSpot

Posted May 3, 2006 3:30 pm PT

The good news: During the fourth quarter of its fiscal year, which ended on March 31, Electronic Arts' net revenue was $641 million, a 16 percent rise over the same period a year ago. The jump was due to brisk sales of several of the Redwood City, California-based publisher's releases this year. Six titles sold more than one million copies during the three-month period, including Black, Fight Night Round 3, The Godfather, Need for Speed Most Wanted, FIFA Street 2, and The Sims 2.

The bad news: EA posted a $16 million net loss for the quarter, versus an $8 million net profit in the same quarter in 2005. That means, after expenses, the company made $24 million less than it did the previous year during the three-month period. A big contributor to the reduced revenue was EA's move to cut the price of many of its new current-generation console releases--including Black, The Godfather, and Fight Night Round 3--by 20 percent in February.

As a result of the earnings report, which was below analysts' estimates, Electronic Arts' stock plunged in after-hours trading, sinking some $3.90 (7.16 percent) to $50.60 per share as of press time.

Electronic Arts also announced its full fiscal year results today, which saw a 6 percent decline in revenues and an even larger drop in profits. For the 12 months ending March 31, it profited $236 million from $2.95 billion of income, versus the $504 million it made from $3.13 billion of revenue the year previous.

Why the slide? Besides a one-time $375 million tax charge due to its use of foreign labor, the company also blamed "$59 million of charges principally associated with acquisition-related activities." EA bought mobile publisher Jamdat in December 2005 for a reported $680 million.

During a conference call after the earnings release, executives played up the high points of the prior fiscal year. "We ended the year with 27 platinum hits, of which 12 were double platinum," said EA CFO Warren Jenson. The number one title for the year was Need for Speed Most Wanted, but Jenson also singled out Black as a top performer with 1.5 million copies sold. He also proclaimed that NBA Live and Harry Potter joined the Madden, Need for Speed, Sims, and FIFA franchises in the elite circle of properties that have generated $1 billion for EA.

Jenson also revealed that EA's exclusivity agreements with the NFL and FIFA are bearing fruit, with Madden NFL 06 selling 10 percent more than Madden NFL 2005, and FIFA 06 selling 20 percent more than FIFA 2005.

As for news of specific games, the company announced delays for its upcoming Superman Returns and Medal of Honor: Airborne games.

With the transition to next-gen consoles partly completed, Jenson partially broke down the cost of switching development to the new platforms. He said in the company's last fiscal year, it spent $758 million on research and development. Of that, $600 million was invested in "EA's worldwide studios on technology, console, and PC products," with another $100 million going to games for "cell phones and handhelds."

As for the year ahead, Jenson said he expects game sales in North America and Europe to be either flat or fall as much as 5 percent. He said EA is expecting the Nintendo Wii and Sony's PlayStation 3 to "launch successfully," but also conceded one or both could experience supply problems akin to those suffered by the Xbox 360. Jenson also underlined the uncertainty of the current transition year. "While we feel we are in great shape on the Wii and the PS3, we, like the rest of industry, still have not built a game," he said. "Many unknowns exist."

40 Comments

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xxscammersxx

hate how they treat their workers....some of their games are good though

Posted May 5, 2006 6:21 pm PT
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jono128

There is an industry-wide slump; it's not just EA who is suffering.

Posted May 4, 2006 1:48 pm PT
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cyprus646

This is what happens when most of your games are sequels i think the only original games they put out were black and the godfather and those games didnt do so well ratings wise.

Posted May 4, 2006 1:19 pm PT
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foofightersrule

Make better games and you will see better profits... I'm glad to see that buying the whole game industry isn't playing out how they expected. All I can hope for is a madden game that can add up to NFL 2k5. And guess what NFL 2k5 costed $19.99

Posted May 4, 2006 10:38 am PT
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sabru8

that sucks......for them at least.

Posted May 4, 2006 10:06 am PT
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WolfSkill5544

EA is just about making money, and not worrying about good original games. And their big loss comes for buying too many licensees which are not worth it to my opinion. Specially when they bought the licences of the NFL, same game, since there is no competition.

Posted May 4, 2006 9:41 am PT
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buckybuckster

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

Posted May 4, 2006 9:36 am PT
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aatish_n

Suprising

Posted May 4, 2006 8:38 am PT
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japanesegoth

"...Yet they expect people to just blindly fork out for their games.... LOL "

...lol, but they do.

Posted May 4, 2006 8:05 am PT
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Kobugodo

who didn't see this coming... just about everyone knew it would happen. pump out the same game with a new suffix is not a new game. In the last 6 months EA has released 3 soccer games. It's great that EA has the only license to FIFA but come on! 3 FIFA games in 6 months? Franchises are great... but you have to do something new with that franchise... Soon EA will have milked all that they can out of the franchise cow.

Posted May 4, 2006 7:37 am PT
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duegrom

Have to agree with a lot of the points above. Constantly pumping out the same old junk is sooner or later gunna hurt you

Posted May 4, 2006 7:16 am PT
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decebal

Time to celebrate

Posted May 4, 2006 7:09 am PT
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thatguytony

Dosen't surprise me to much that no one feels bad for EA. Maybe EA will have to actually release some good games for a change if they want their profits to increase.

Posted May 4, 2006 6:36 am PT
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Blazer88

Yeah EA needs to actually do something with all that money they have other than re-hashing year after year.Oh and bring back Ultima...and don't screw up C&C 3 !!!Sequals are ok,...just need to not do them so frequently.take a break,.do something else,..go back later.

Posted May 4, 2006 6:27 am PT
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Splintersixcell

[This message was deleted at the request of the original poster]

Posted May 4, 2006 6:18 am PT
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chrisdojo

LOLz.....guess they might have to release 2 maddens in a year to make more $$$$.

Posted May 4, 2006 5:11 am PT
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thekey

I just hope EA keeps spending more money then they keep making so that it can open the door for real game makers all around the world who care about the quality of there games.

Posted May 4, 2006 4:48 am PT
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FuguNabe Is right they are the kings of rehash, they expect consumers to keep paying full price for subpar releases.
Madden 06 sucked(for both the current gen systems and the xbox360)
NBA live sucks(Period)
FIFA(No comment)
Need for speed (start off great but no is approaching obscurity

EA! Take notes: Make real complete games! Stop getting exsclusives you loosing(as if you ever had) your talents, you need competition

And by the way EA blows.

Posted May 4, 2006 4:45 am PT
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pungaboy

EA is pretty smart. I wouldn't say they aren't mis-managing anything. They've just spent a buttload of money this year ramping up on next-gen projects. I think that one quarter of loss will probably pay off in better-looking, better-playing games.

Posted May 4, 2006 3:27 am PT
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KiLLer_ba

ouchers

Posted May 3, 2006 11:55 pm PT
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trancejeremy

Consdiering that sales are up, it doesn't seem like it's the games that are the problem, but mis-management somewhere.

Posted May 3, 2006 11:05 pm PT
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Benny_is_here

That's gotta hurt...

Posted May 3, 2006 10:38 pm PT
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fenriz275

I'd wait a while before I write off EA after one losing quarter. They spent a lot of money this quarter. Though I do agree with a lot of the comment that EA needs to start releasing more good games. The last couple of years EA has released a lot of junk.

Posted May 3, 2006 9:37 pm PT
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zenion_butyl

I agree, it is not the beginning of the end. It will rise again, just like it has fallen this time and in the past. It is all a cycle...

Posted May 3, 2006 8:04 pm PT
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kriptonzz

I think I should credit Gimpymoo and FuguNabe with the best quotes on this page, they sum it up pretty darn well.

Posted May 3, 2006 8:03 pm PT
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Exxelerator

Right on!

Posted May 3, 2006 7:55 pm PT
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maximo1

EA has bought too much and don't spend enough time developing games.

Posted May 3, 2006 7:50 pm PT
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NeoJedi

EA won't fall... it's just going through a slump, just like the other software companies out there. I'm not gonna diss EA because it's the "cool" thing to do right now.

Posted May 3, 2006 6:55 pm PT
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tergeoglou

EA is learning the lesson vince mcmahon is learning , taking out the competition is smart on paper but in the end it only hurts your product quality.

Posted May 3, 2006 6:40 pm PT
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Dante200X

what gimpymoo said sums it up perfectly

Posted May 3, 2006 6:31 pm PT
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FuguNabe

Wouldn't expect much from lame ol rehash king, EA. Big budget, subpar releases. Just updated roster sport titles with little improvement (if any) every year... blah, blah...Yet they expect people to just blindly fork out for their games.... LOL

Posted May 3, 2006 6:29 pm PT
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struong

Ouch!

Posted May 3, 2006 6:15 pm PT
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Javier

They will soon have to strap a ham sandwich to their yearly updates to sell them...

Posted May 3, 2006 6:13 pm PT
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mdotmu

Yay!! Go suck EA!!! C'mon someone buy Maxis already so we could all play Spore and the next new Sims games!

Posted May 3, 2006 6:09 pm PT
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Nachoking2k2

HOpefully they'll go bankrupt and we can get NFL 2k back.

Posted May 3, 2006 6:07 pm PT
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lordzod89

And the fall of EA begins

Posted May 3, 2006 6:05 pm PT
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blackIceJoe

No shock I wonder if EA will start making good games that take at least three years or more any day soon.

Years ago EA was good but not for at least seven years.

Project Grey hound I think has some good ideas and hope it will be a game that will let people see that EA can make good games.