EA's holiday revs flatline, stock rises

[UPDATE] Megapublisher's net revenue rises 1 percent, net income slips 38 percent during the last quarter of 2006--but its stock spikes over $3 in after-hours trading.

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Today Electronic Arts reported its earnings for the third quarter of its fiscal year, which ended on December 31, 2006. During the three months, the company saw a modest year-on-year increase in quarterly net revenue, going from $1.27 billion to $1.28 billion.

The Redwood City-based publisher's net income, however, fell precipitously, going from $259 million in October-December 2005 to just $160 million during the same period in 2006. [UPDATE] However, the numbers were better or in line with most analysts' expectations, and EA stock rose sharply in after-hours trading. After closing on the Nasdaq at $50.54, the company's share price had shot up over $3 as of press time.

One likely factor contributing to EA's decline income was the short supply and poor tie-in ratio of the PlayStation 3, which NPD estimated sold just over 600,000 units in the US during 2006. EA released four PS3 games during the quarter and now claims it has a 32 percent share of the PS3 market in North America. Nonetheless, EA sold $41 million worth of PS3 games $29 million of Wii games during the quarter. Chairman and CEO Larry Probst said his company "was pleased with the performance of our products on next-generation consoles."

Wedbush Morgan Securities analyst Michael Pachter said the constrained supply of PS3s was certainly a factor EA didn't make more money. However, he predicts the setback is only temporary. "It's not like there will never be PS3 games again," he told GameSpot. "My belief is that people will ultimately buy games, and EA will get its fair share of those sales."

Pachter also said the main culprit for EA's less-than-stellar quarter was the rising cost of developing games for the newest batch of consoles. "Earnings are lower because their R&D spending went from $206 million to $330 million," he told GameSpot. "That's over $0.25 a share all by itself." EA spent $23 million in October completing its takeover of Battlefield developer Digital Illusions CE (DICE) and founded a Wii-centric studio in November.

In a statement, EA CFO Warren Jenson alluded to the cost of his company's expansion of in-house development. "The past several years have been about investment," he said. "The coming years are about growth and reward." Jenson also played up the fact that EA's revenue from digital content hit a record $115 million during 2006, a number Pachter found "impressive." During the quarter, the company made $37 million from digital content, which includes items sold on Xbox Live Marketplace and casual games sold on Pogo.com.

Game-wise, the quarter's biggest sellers were the latest entries in EA's storied franchises. More than 10 million games from the Sims franchise were sold during the three months, with The Sims 2 Pets selling 5 million by itself. More than 8 million copies of Need for Speed Carbon were sold during the quarter, and more than 6 million copies of FIFA 07 were sold worldwide. Madden NFL 07 also topped 3 million units and ended the year with more than 8 million copies sold in North America alone--making it the most popular game on the continent in 2006, according to EA.

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JeffreyCor

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The only one I like out of all of these is Sims 2. Maxis should have stayed seporate from EA

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Newsboy

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Dear EA: Look at the 1930s mega-movie houses and the way they ran their productions and then take a long hard look in the mirror. See any similarities? You both sign exclusive rights and contracts with as many crative forces as you can but set unreasonable deadlines and production goals to feed your machine you're forgetting one thing: NOBODY LIKES WHAT YOU'RE MAKING ANYMORE! Ultimately, this lead to the collapse of the old Hollywood system and the rogue director was born. Which translated into unprecidented levels of great movies! While Hollywood is starting to revert back to it's old ways why don't you guys start turning your teams lose? Give them a break and the freedom to originate their own ideas! Who knows, maybe you guys won't suck anymore?

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frankeyser

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i like two ro three of their games they put out a year... other that that all the games they put out are the same exact game... sometimes with less features.

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bghattas

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EA has some good franchises but I feel they release too many rehashed games that we've all seen before. Is it possible that the "casuals" are starting to see the light? Let's hope so.

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emorule

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Some of there games are ok

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cbutkus

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Jenson also said: The company plans to boost sales for the Wii with four new titles set for release this period, including a Tiger Woods golf game, Chief Financial Officer Warren Jenson said in an interview. The company has 15 Wii games in development, he said. ``We have significantly increased our development'' of Wii games, Jenson said.

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chakan2

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Man I wish EA would fold so they'd get rid of the exclusive NFL contract. I want 2K NFL again.

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mattcrwi

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DOWN WITH THE EMPIRE!

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just_an_opinion

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i'm from uk, but i had enough of the same need for speed and fifa and rubish nba games year after year after year........ didn't mean to offend anyone.

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Sheiko

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Why does EA remind me of AT&T before it broke down into 3 companies....

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enoslives7

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bad karma has come full circle on EA..... EA is out to put a stranglehold on sports gaming, which hurts gamers like me and you. Everyone needs to boycott EA until they are bankrupt. Their reign of evil must end now !!!!!!

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Brock_UK

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Oi! I am quite offended with that comment you Yankee! :(

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SilV3RSix

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1% growth because the memo got out that their games SUCK

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just_an_opinion

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correction, i though Fight night round 3 and most wanted were preety good

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just_an_opinion

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its a shame but people in uk love up all these lame EA games. i'm glad to say i'm not one of them!

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just_an_opinion

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the only reason they are not more in the red is becuase they have been ripping people off on XBL markeplace for content that should come with the game FREE as standard!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

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MedevilDragon

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The death of EA has began.

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briph24

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yes... i hate ea so much, they suck and i hope they go bankrupt and live in boxes out on the street and eat out of dumpsters.

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Blackfriend8

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this sucks all those games that where the top sellers where just minor upgrades to the previous games lame

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speedracer15

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they need to make sure all their games are great....not just a few......... they will be fine.

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gozalo

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YaY

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PuffstaJones

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hurry up and die EA.

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babaikas

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poor ea..they suck nowawdays

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goddessakasha

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Maybe this will push them into making higher quality games.... or maybe it'll just turn them into even bigger slave drivers for their poor developers.

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comthitnuong

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living off of the sims and madden it seems..for now..I think they need to pump out some more quality games

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