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EA suffers $641 million Q4 loss, increases layoffs to 11%

Publisher posts disappointing holiday quarter, increases job cuts; game delays pull down full-year guidance to $4.2-$4.25 billion; Warhmmer OL subscribers drop to 300,000.


Electronic Arts may have had one of the most robust lineups of new intellectual property in 2008, but the publisher continues to struggle to turn a dime. Today, the Redwood City, California-based publisher announced third-quarter earnings for the all-important holiday period, and in the words of EA CEO John Riccitiello, the results were "a clear disappointment."

It sold 5.2 million copies, but EA still considers Need for Speed Undercover a bit of a lemon.
It sold 5.2 million copies, but EA still considers Need for Speed Undercover a bit of a lemon.

For the October-December quarter, EA posted total net revenues of $1.65 billion, up $151 million from the year-ago period. That figure is substantially tempered by EA's total losses for the period, which grew to a staggering $641 million compared to $33 million from the year prior. As noted by EA, the publisher was heavily weighed down by a goodwill impairment charge of $368 million related to its wireless business as well as a $244 million charge pertaining to deferred tax assets.

"Our holiday quarter came in below our expectations, and we have significantly reduced our financial outlook for fiscal 2009," said Riccitiello in a statement. "We delivered on game quality and innovation in calendar 2008, with 13 games rated 80 or above, more than any third-party publisher. We expect to build on this great-quality record in the year ahead while delivering more profitability."

EA also announced today that it plans to reduce head count beyond its previous 10 percent estimate. EA now expects to cut its workforce by 11 percent, or 1,100 employees, as well as close 12 facilities, "narrow its product portfolio," and eliminate certain other costs. The publisher has already enacted a number of these cuts, with such studios as Skate 2 and Need for Speed developer Black Box and Madden NFL office EA Tiburon both having confirmed layoffs in the past month.

As a result of the grim holiday quarter, EA said that it would once again be lowering its full fiscal-year outlook. For the year ending March 31, EA now expects to pull in between $4.2 billion and $4.25 billion in fiscal 2009, with a loss per share of between $3.29 and $3.56.

In news that would also impact the publisher's lowered forecast, EA said that it would be bumping a trio of games out of fiscal 2009. The Sims 3, which had previously been expected on February 20, is now expected to arrive on June 2. BioWare's Dragon Age: Origins, which had been penciled in for a PC launch before the end of March, is now slated for the back half of 2009. Finally, Godfather II will move beyond its announced February 24 date, though no updated release window was revealed.

Even with the unsettling performance, EA had a number of wins to tout during the quarter. Despite continued pressure by Activision Blizzard, EA claimed the title of top North American publisher for the quarter, capturing a 20 percent share of sales according to data provided by the NPD Group. The publisher also said that MTV Games and Harmonix's Rock Band (which EA distributes through its EA Partners program) was the best-selling cross-platform game in North America during calendar-year 2008, according to NPD.

The publisher's best-selling game for the quarter was the well-rated FIFA 09, which logged global sales of 7.8 million. Need for Speed Undercover was another top performer, selling 5.2 million copies worldwide. That figure is slightly off from Undercover's predecessor, ProStreet, which had sold 5.5 million units during the same period last year. The publisher also provided a disheartening update on EA Mythic's Warhammer Online, saying that the massively multiplayer online role-playing game's subscriber base has dwindled to 300,000 through the end of December. In October, the game boasted more than 750,000 registered users.

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