EA stock takes a beating

By Brendan Sinclair, GameSpotPosted Dec 10, 2008 3:29 pm PT

Publisher's disappointing guidance revision sparks sell-off of stock and analyst downgrade; shares lose 12 percent of value in a single day.

Yesterday, Electronic Arts gave analysts a heads up that some disappointing financial reports are on the way. After the close of trading, the publisher withdrew its previously issued financial guidance for the fiscal year ending 2009, saying that its net revenue and earnings-per-share expectations would not be met.

Shareholders reacted to the news today by selling off EA stock at nearly six times the daily average. EA shares opened the day trading at $16.85, down nearly 13 percent from the previous close of $19.35. Over the course of the trading day, they recovered slightly to close at $17 even, still down more than 12 percent for the day.

They weren't the only ones backing off the publisher's stock. Wedbush Morgan Securities analyst Michael Pachter downgraded his rating of EA shares to "Buy" from "Strong Buy." Despite the move and an investors note taking EA management to task, Pachter is still mildly optimistic about the publisher.

"The company remains the largest third party packaged goods publisher, has a large number of successful franchises, and has tremendous brand loyalty," Pachter wrote. "Should management execute on the renewed promise to get things right, we have no doubt that the company can grow earnings at a rapid rate. Thus, as much as we may feel it appropriate to give up completely on the stock following yet another misstep, we think it would be inopportune to do so."

Pacific Crest Securities' Evan Wilson showed less patience with the publisher in his own note to investors.

"EA admitted that its games did not sell well, but it did not take responsibility and address the core problem that it has not produced hit games," Wilson said, adding, "EA is positioning itself as a victim of its circumstances--that the best is yet to come after it makes it through these difficult times. However, we continue to believe that its actions exacerbate the negatives that the videogame industry as a whole is facing. Results have been mediocre for too long."

The lowered projections are just the latest in a series of hits EA has taken this year. In October, the publisher announced a greater-than-expected $310 million loss, or 97 cents per share, for its fiscal second quarter. That loss came despite net revenues spiking 40 percent to $894 million during the July-September reporting period. At that time, EA also revealed that it would be cutting 6 percent of its workforce--or roughly 600 jobs--across a variety of divisions within the company. Yesterday's news included word that EA would be laying off still more employees, consolidating facilities, and cutting back on its slate of games for the next year.

190 Comments

  • codename-60091

    Posted Jan 13, 2009 6:45 am PT

    hey idiots go meow urself!! buying a rubbish games from EA bad made me broke enough both physically and mentally!!! promote smoking in games.(NFS) where are u god da..mn ethics?

  • s0ck69

    Posted Jan 5, 2009 3:40 pm PT

    jesus there is a complete lack of intelligence on this topic.This story is about people losing there jobs! It has apsolutely nothing to do with poor quality games and drm.Maybe you should watch the news,maybe then you would realise we are about to enter the biggest recession the world has ever seen.EA like almost every other company on the plannet are preparing for the worst.So be carefull what you wish for as your job could be next!

  • zaptoman

    Posted Jan 5, 2009 11:36 am PT

    It only takes one look at any gaming forum to find out why EA isn't selling the number of games it expects. DRM. Securerom3 and limited installations take the game away from the consumer. They transform a product bought and paid for into a glorified rental, with the added caveat of EA control of your system. Wake up EA. Wake. Up.

  • s0ck69

    Posted Jan 5, 2009 11:21 am PT

    i hope the people who think being made redundant is funny and something to poke a finger at lose there jobs one day.Face facts without mummy and daddys help you wouldnt last a day in the real world.This isnt about the games EA publish but about real people losing there jobs.Get a grip and grow up!

  • KennyBlanknshp

    Posted Jan 3, 2009 3:55 am PT

    The comments below prove my point that there are more ignorant people in this world then ones who are knowledgable. I lost my job in 07 due to the economy as did the 150+ that also worked there. 60 people just got laid off 5 days before xmas. Plus there have been smaller layoffs around. All total in the last 2 years 350+ laid off in a town of 12,000. I am finally very secure in my job but are you? Those 350+ people with families thought they were. Now if half of of the 600,000 that lost their jobs last months were gamers and are no longer buting games, what do you think that is gonna do to gaming companies? Maybe if it wasn't for EA the games the companies they now possess may have never been made. Possible.

  • Sepewrath

    Posted Jan 2, 2009 3:20 pm PT

    Its amazing how selfish and ignorant people are about someone losing their job. You may not like their games but people have responsibilities like bills and families to feed. People like you are the reason that there is little hope for humanity. "I'm a gamer" such a stupid statement I hope your only 12 so you have an excuse for being such an idiot. Otherwise you need to grow up and understand that there is a world outside of playing video games.

  • TigerLord posted Jan 1, 2009 10:44 pm PT (does not meet display criteria. sign in to show)

    TigerLord

    Posted Jan 1, 2009 10:44 pm PT (hide)

    Thank God, EA can burn in hell with all their crappy DRM and awful support.

  • finchused

    Posted Jan 1, 2009 9:02 pm PT

    SgtStrungOut you are being just as ignorant as anybody else, saying that EA doesn't make good games. They can and do make good games, just because they don't appeal to you doesn't mean that it is a bad company. Am I defending EA? To an extent I suppose but I'm not too friendly with them either due to the large buy outs and all.

  • SgtStrungOut posted Jan 1, 2009 5:27 pm PT (does not meet display criteria. sign in to show)

    SgtStrungOut

    Posted Jan 1, 2009 5:27 pm PT (hide)

    To Berlin17: Sorry kid, I'm a gamer NOT a guy who spends his time looking at sales and lay offs. I am glad this happened. EA sucks and doesnt know how to make good games anymore. All their stuff is for the casual gamer or people who dont know what good games are. Good stuff this happened. Maybe they might take this into consideration and up the quality of their weak games.

  • Berlin17

    Posted Jan 1, 2009 4:41 pm PT

    600 people loseing their jobs is good news? Some of you people are stupid

  • havoc470

    Posted Jan 1, 2009 4:53 am PT

    EA games are good.

  • Projekt_Zeer-O

    Posted Dec 31, 2008 5:17 pm PT

    EA would do better if their games were actually good. ^_^

  • FinalMyrmidon

    Posted Dec 31, 2008 10:04 am PT

    The problem in any market is the capacity of the consumer. Modern gamers are a lot more iffy about their games than they were when I was a kid. Even as the overall quality of games improves, I still hear countless people complaining and telling their friends to not buy games for some trite and insignificant problem. If people want to know why EA is suffering despite some quality titles lately, I'd say the obnoxiousness of the modern gamer has at least something to do with it.

  • tu2pac

    Posted Dec 31, 2008 8:15 am PT

    Surprise!
    ...Not ... a first person free running game ... if you didn't dump your stack when you heard about that ... then you're a fool.

  • Mr_duong

    Posted Dec 30, 2008 9:57 pm PT

    i just want skate 2

  • Jigsaw9798

    Posted Dec 30, 2008 8:27 pm PT

    Um you people do realize that Dead Space was developed by an in-house EA studio, right? That means EA did make it.

  • matt_burke

    Posted Dec 23, 2008 2:29 am PT

    Give us PC heads a BF game and we'll buy it. Turn coats!

  • polodoro posted Dec 19, 2008 3:11 am PT (does not meet display criteria. sign in to show)

    polodoro

    Posted Dec 19, 2008 3:11 am PT (hide)

    Damn EA! They are the true definition of evil! They buyout the games industry and then leave it to rot. Why not just shut down all of your divisions and invest in gambling? Sure no one will be able to play any video games (at least we won't have to deal with DRM!) but at least the fat cats upstairs will get their feed!

  • JYoung103175

    Posted Dec 18, 2008 9:13 am PT

    I still love Madden! As far as them making bad games, just dont buy em. How else does this effect anyone? Your choice of what game you buy is yours, no one elses. I buy games I like, or get RAVE reviews, I dont look at creator or publisher, although I know some are better then others. I am a hardcore gamer, but I could give a crap less who makes them as long as they kick a$$. Ive owned every console except Sega Saturn since Atari, so I think I know a thing or two. Just play the bada$$ games, and forget the rest. What do you have to lose if they make crap?

  • hotrider12

    Posted Dec 17, 2008 8:51 pm PT

    boy wish I had a billy club right now I'll join the millions beating down on poor ol EA

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