EA posts $391 million loss, Madden 10 sells 3.9 million

$788 million in earnings can't keep megapublisher out of the red; workforce slashed by 17%, development pipeline cut in half; Need for Speed Shift ships 2.5 million.


This morning saw a flurry of news from Electronic Arts, the world's second-biggest third-party game publisher. After announcing it had acquired social game publisher Playfish in a deal potentially worth $400 million, the company confirmed it was laying off 1,500 employees--or 17 percent of its global workforce--in an effort to save $100 million per year.

EA's Redwood City, California HQ was also hit by today's layoffs.
EA's Redwood City, California HQ was also hit by today's layoffs.

The job cuts were confirmed in EA's earnings report for the July-September quarter, during which the company posted net revenues of $788 million, down from $894 million during the same period in 2008. However, the Redwood City, California-based publisher said that $359 million in deferred revenue costs contributed to it posting a $391 million loss, an increase from the $310 million shortfall it suffered during the same quarter the year prior. Quarterly loss per share was $1.21, up from $0.97.

Despite the losses and the layoffs, EA executives tried put a brave face on things. In a conference call with analysts, CEO John Riccitiello touted the fact Madden NFL 10 has sold over 3.9 million copies worldwide since its August launch. He said that on the PlayStation 3 and Xbox 360, sales were up 5 percent over Madden NFL 09. EA Games president Frank Gibeau also played up the fact that Need for Speed Shift, the latest reboot of the once-mighty racing franchise, had shipped (not sold) 2.5 million units. The executives also said that "early read on sell-through is strong" for the role-playing game Dragon Age: Origins, which was released to glowing reviews last week.

However, Riccitiello did concede that, as a result of the restructuring, "over a dozen" games had been canceled. "Anything that doesn't measure up to be in a very high profit contributor and unit seller got cut from this point going forward," said the CEO.

While he did not identify any titles, the executive did say that EA has effectively reduced the number of games in its development pipeline by half in just two years. "Mid-60s would have been the way to think of it last year," said the CEO of the number titles EA had in the works. "The way we are looking at it now, there are approximately 50 there this year, and something in the high 30s next year. So when you consolidate this thing, it is about a 50 percent cut over two years."

Looking ahead, EA is forecasting revenues between $3.6 billion and $3.9 billion for the fiscal year ending March 31, 2010. It is also expecting a loss per share between $1.20 and $2.05, resulting from the $120 million to $145 million in restructuring costs, $24 million of "losses on strategic investments," and other charges.

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