[UPDATE] Publisher’s share price plummets in after-hours trading following revised annual earnings estimate–slow holiday sales blamed; CEO says “major new MMO” coming “spring 2011.”
Much like it did in 2009, Electronic Arts began the New Year with some disappointing news. Today after trading ended on the New York markets, the publisher announced it was lowering its earnings estimates for the fiscal year ending March 31, 2010. The Redwood City, California-based company now expects net revenue between $3.6 billion and $3.675 billion for the year, down from the previously forecast range of $3.6 billion to $3.9 billion. It now anticipates per share losses between $1.94 and $2.24, up from a range of $1.20 to $2.05.
“Revised fiscal year 2010 expectations are primarily the result of weakness for EA and the overall packaged goods sector in Europe in December, and a product mix shift to lower margin distribution products in the December quarter, primarily in North America,” the company said in a statement.
For the October-December quarter, the company now expects losses of between $0.24 to $0.32 per share on revenues of $1.227 billion to $1.247 billion. During the period, EA had several high-profile releases, such as FIFA Soccer 10, BioWare’s Dragon Age: Origins, and The Saboteur, the last game from Pandemic Studios before most of its staff was laid off. The company also published Valve Software’s Left 4 Dead 2 under its EA Partners program.
[UPDATE] “We had anticipated roughly flat year over year sales in Europe but packaged sales were down up to 50 percent in some regions,” EA CFO Eric Good told analysts in the conference call. He said digital sales were above expectations, but not enough to offset lowered packaged-goods sales.
EA CEO John Riccitiello said EA’s core strategy was sound and progress has been made on cutting costs, increasing profit, and bringing back the quality of owned game properties. However, he did concede that company management had “been surprised” by the impact of increased digital sales and the global recession.
Looking ahead, the executive called out five titles he expected to be major sellers in the current quarter: Army of Two: The 40th Day (January 12), Mass Effect 2 (January 26), Dante’s Inferno (February 9), Battlefield: Bad Company 2 (March 2), and
Command & Conquer 4: Tiberian Twilight (March 16).
Riccitiello also said that the company is planning to launch “our major new MMO”–presumably BioWare Austin’s Star Wars: The Old Republic–in “spring 2011.” It was unclear if he meant calendar year 2011, or EA’s 2011 fiscal year, which ends on March 31, 2011. Ricctiello did promise that FY2011 highlights will include “a great new Medal of Honor Sims on consoles and an innovative new take on Madden.”
[UPDATE 2] When asked if Riccitiello was talking about SW: TOR, an EA rep would only offer the following statement: “No further comment beyond what John said. This wasn’t a comment about a specific franchise, but a notation on how we are building a plan and guidance for the next fiscal year.”
Though EA shares ended the day down just $0.13 in regular trading, after-hours traders reacted swiftly–and negatively. A half hour before EA executives were scheduled to hold a 2 p.m. PST conference call with analysts, the company’s stock had fallen more than $1.70 per share–over 9 percent of its value.
Today’s announcement is the latest bad news to emerge from the former top third-party publisher. In November, EA announced the layoffs of 1,500 employees, roughly 17 percent of the company’s workforce, and the cancellation of over “a dozen” games. That move came less than a year after the publisher’s previous major restructuring, in which it cut 1,000 employees from its global payroll.