Electronic Arts, the world's largest video game maker, announced Tuesday what many investors had already feared: Holiday sales won't be enough to pull the maker of hit games such as "Madden '06" out of a lackluster year.
In a conference call with reporters and analysts, EA chief financial officer Warren Jenson said the Foster City, Calif. company won't meet prior sales and earnings guidance for the current, third fiscal quarter, which ends Dec. 30. The game giant also expects to come up short on expectations for its fourth fiscal quarter and for all of fiscal 2006, which ends in March.
"It now appears (that the) overall market will be down double digits," Jenson said. "The demand curve has shifted abruptly."
This is not the first time in recent memory EA has announced disappointing results. In January, and again in July, the company said sales were slow and profits were down. However, "Madden '06," the latest update to the company's best-selling football title, has led industry sales throughout the fall.
Jenson explained that while initial sales of Microsoft's next-generation console, the Xbox 360, were strong in North America and Europe, EA now doesn't think sales of the console or games made for it will be as high as expected.
Further, he said, many people think Sony's forthcoming next-generation PlayStation 3 console will hit shelves in the spring and that may be causing consumers to hold off on purchasing games for the current-generation PlayStation 2 and Xbox.
Asked if the company plans to cut research and development costs across the board as a way to make up revenue losses, Jenson said, "We're going to go through every aspect of the company, and where we have opportunities to reduce spending, we will take advantage of that opportunity. We want to come out of this stronger and faster."
Still, Jenson and EA CEO Larry Probst said that lower sales are an industry-wide issue. In fact, they said, the company's market share on current-generation consoles hasn't changed, and remains at about 30 percent. They also said that initial sales figures for the Xbox 360 show that EA has about 30 percent of the market share for Xbox 360 games.
Last week, Activision, the No. 2 video game maker, said its profit for the remainder of its fiscal year would miss its previous target amid the shift to the new generation of game consoles.
Analysts seem unsurprised by EA's announcement, largely due to their understanding that sales have been down generally for the last few months.
"Going into this console transition period, I think we are in for several quarters where software sales will not be as high as people were hoping for," said David Cole, president of DFC Intelligence. "Activision has been in a similar boat. It's more industry specific. It's not a reflection of EA."
Electronic Arts did not give specific numbers, but the company previously expected a third-quarter profit, excluding items of between $1.18 and $1.28 a share on revenue of $1.48 billion to $1.58 billion.
For the full fiscal year, the company had forecast income excluding items of $1.45 to $1.60 per share on revenue of $3.25 billion to $3.4 billion.
The company's shares fell 2 percent in extended trading to $52.02. The stock rose more than 1.6 percent in regular Nasdaq trading.
I am SO glad that EA is feeling it where it hurts. I ordered Sims 2 Holiday Pack off their web for my daughter and they sent and charged my for 2. No phone number on the site, no phone number on the invoice. Called information 2 times, finally got the corp headquarters and was MOCKED at when I had the audacity to get upset with them on the phone. My daughter can do without any more EA games from now on.
I don't know who is worse, Steam or EA/Dice. I swear no one beta tests their patches anymore. Every patch EA and Steam rolls out they always screw up something. Then try going to EA to get an answer.
Then like how some games provide you with new maps and content for free, with EA you have to buy expansion packs.
Isn't this what Nintendo was touting the last while? The market's in a slump because developers are making crap games, and they deserve any punishment they get for doing so (financial punishment, not the "dark alley" kind). This is the first Christmas in my life where I've had no exams or assignments, and I was really looking forward to playing some top holiday titles. And boy! is it the WORST Christmas for videogames! Thankfully I still have my copy of Resident Evil 4. Hoorah!
I haven't seen any really good games (i.e. ones worth paying $50 for) for over a year. I just traded in my Gamecube and GBA for a PS2 because some classic Playstation games are fun and creative.
If Nintendo's Revolution comes with lots of fun, creative, quirky games, I'll buy one. If the games are the typical retreads of first person shooters, sports simulations etc, I won't bother.
I also feel the gaming industry is headed for an 80s style crash. What brought on the 80s crash was an onslaught of crappy, shallow, repetitive games, and what ended it was the high-quality, creative games for the NES.
Hasn't anyone in the gaming industry learned that fancier graphics ARE NOT THE ANSWER? Make games people want to buy and want to play. Take risks, make different games (the "experts" believed SimCity would be a total flop), provide new worlds. That is what save the gaming industry. Not more of the same.
The 2K line from SEGA is generally as good as the EA line up and 1/2 the price....if you are going to 'upgrade' every year..why pay $50 bucks? Just to hear Madden?
When most of us cannot even get one without jumping through hoops, the Xbox 360 couldn't be expected to boost sales that much. I think there are only about 300K of the systems available for the entire country.
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Then like how some games provide you with new maps and content for free, with EA you have to buy expansion packs.
a slump because developers are making crap games, and they
deserve any punishment they get for doing so (financial
punishment, not the "dark alley" kind).
This is the first Christmas in my life where I've had no exams or
assignments, and I was really looking forward to playing some top
holiday titles. And boy! is it the WORST Christmas for videogames!
Thankfully I still have my copy of Resident Evil 4. Hoorah!
Perhaps Madden 3456 will come to the rescue
If Nintendo's Revolution comes with lots of fun, creative, quirky games, I'll buy one. If the games are the typical retreads of first person shooters, sports simulations etc, I won't bother.
I also feel the gaming industry is headed for an 80s style crash. What brought on the 80s crash was an onslaught of crappy, shallow, repetitive games, and what ended it was the high-quality, creative games for the NES.
Hasn't anyone in the gaming industry learned that fancier graphics ARE NOT THE ANSWER? Make games people want to buy and want to play. Take risks, make different games (the "experts" believed SimCity would be a total flop), provide new worlds. That is what save the gaming industry. Not more of the same.