Electronic Arts cuts loss, shares rise
Aug 4th 2009 5:50PM
Updated Dec 4th 2009 1:37PM
The company reported a first-quarter loss of two cents a share ($6 million) based on revenue of $816 million. In the same quarter last year, EA barfed up a stomach-churning loss of 42 cents a share ($135 million) on much diminished revenue of $609 million. Today's numbers were a significant beat on Wall Street analysts consensus. A Thomson Reuters analyst survey had forecast EA losing 13 cents per share on $729.5 million in revenues.
Whether the revenue gains are sustainable is hard to tell. The second quarter is traditionally among the weakest for video game companies but EA launched several prominent titles during the period including "The Sims 3", "EA Sports Active" and "Fight Night Round 4." The launches likely goosed revenues nicely. EA is unlikely to unleash any new launches until the fall, when video game buyers tend to return from super dormancy.
The strong results, however, are perhaps another sign that the Great Recession is on the wane. Once considered a bullet-proof part of the consumptive economy, like gambling, video games took a hit over the last year as gamers reduced their buying. This was likely particularly true for middle-aged gamers, who now make up a significant percentage of the gamer population. Even the wildly popular Nintendo Wii started to flag in the past two quarters.
How much of a recovery the game industry will enjoy overall, however, is extremely hard to predict. Console makers are still selling machines that are now relatively long of tooth, such as the Microsoft (MSFT) XBox 360, the PS3 and the Wii. New console purchases tend to drive significant video game sales. On the other hand, this far out in the cycle, gamers are often very willing to purchase new titles at an equally snappy clip as when consoles come out. All told, it's a total toss up for what the immediate future looks like for game companies but EA's earnings would seem to indicate that the thrill is back in these favorite cyclical stocks.
Highlights of the quarter included (with comparisons to the same quarter last year):