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EA's Q1 earnings slip 4 percent

Touting eight original IPs in fiscal '08, publisher reports $395 million in quarterly revenue; latest Harry Potter game moves 2M units in four days.


Hours after rival THQ reported a decline in earnings for its first fiscal quarter, Electronic Arts has done the same. The world's biggest third-party publisher reported $395 million of net revenue for the April-June quarter, down four percent from the $413 million it took in during the same period in 2006. The company's net quarterly loss also grew year over year from $81 million to $132 million, or $0.26 and $0.42 per share, respectively.

EA's shortfall came during three boom months for the US game-industry, which saw revenues grow 20 percent in April, 49 percent in May, and 31 percent in June. In its earnings report, the publisher didn't cite any primary reason for the downturn, but did mention that changes to the way it bills for hosting online game services will cause "a $36 million sequential increase in deferred net revenue" which will be included in a later period's earnings.

Of its April-June releases, EA singled out its top title as the multiplatform film tie-in Harry Potter and the Order of the Phoenix, which sold--not shipped--two million units in the four days after its June 25 release. Other big sellers for the month were Need for Speed Carbon, The Sims 2 Pets and The Sims 2, and Command & Conquer 3 Tiberium Wars, which launched on 360 during the month. To date, the EALA-developed game has sold over 2 million units worldwide.

In a statement, EA CEO John Riccitiello talked up organization changes and two high-profile hires during the quarter. "In the last three months we announced the reorganization of our business into four labels and welcomed Kathy Vrabeck and Peter Moore to EA," he said. EA Casual president Vrabeck served as Activision president from 2003 to 2005, while EA Sports president Moore had been the Xbox 360's most public face as corporate vice president of the entertainment and devices division of Microsoft's interactive entertainment business.

EA also made much of the product lineup for its 2008 fiscal year, which ends on March 31, 2008. The 12 months will see the publisher release eight all-new IPs, including Boogie, EA Playground, Army of Two, Skate, Smarty Pants, Rock Band, Crysis (now due in early November), and "PQRS"--a code-named Wii game codeveloped by filmmaker Steven Spielberg. Two new titles based on existing licenses--board game-based Warhammer Online and the cartoon-inspired The Simpsons Game--will also hit stories during the period.

Also due in EA's 2008 fiscal year are Medal of Honor Airborne, Need for Speed ProStreet, SimCity Societies, and the latest Sims 2 expansion, The Sims 2: Bon Voyage. EA Sports will also roll out the latest installments in the FIFA, Tiger Woods PGA Tour, NBA Live, and all-important Madden NFL franchises. The division recently released NCAA Football 08 and NASCAR 08 on several platforms.

In a largely uneventful postearnings conference call with analysts, EA executives declined to give a price for Rock Band's instrument peripherals. They said Madden NFL 08 at least "a half million" preorders, and said they were considering lowering the price of the PlayStation 2 version of NCAA Football 07, which is lagging behind other platforms. Riccitiello also downplayed competition from Halo 3 and Grand Theft Auto IV, saying that the two games would boost console sales and thereby benefit the industry as a whole.

Though EA's earnings were reported after the Wall Street markets closed, its share price ended the day at $48.10, down $0.54 (1.11 percent). In after hours trading, it slid further, down $0.81 (1.68 percent) to $47.25 as of press time.

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