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An FYI for any of you follow the business end of all this
=DJ UPDATE: Electronic Arts, Lacking Big Names, Cuts Views Again
(Updated throughout with analyst reaction and context.)
By Ben Charny
Of DOW JONES NEWSWIRES
Electronic Arts Inc. (ERTS) lowered its fiscal-year guidance for the
second time in two months as the world's top video game publisher
continues to suffer from a lack of compelling titles.
EA's warning comes as the company, which has some of the highest
development costs in the industry, is downsizing to focus on fewer
games amid an industry-wide slowdown sales. The Redwood City, Calif.,
company blamed its latest warning on weakness in Europe in December
and a shift to lower-margin products in the latest quarter, primarily
in North America.
Signal Hill Group analyst Todd Greenwald said the warning reflects
how the videogame industry's top two to three titles are selling well
at retail, but nothing else is. Activision Blizzard Inc.'s (ATVI)
"Modern Warfare 2" and other big-selling titles "are sucking the air
out of the rest of the market," Greenwald said.
Because EA doesn't publish as many top-selling titles as its rivals
do, the company--known for its Rock Band and Madden video-game
franchises--is especially susceptible to the recession-driven trend of
consumers not spending their entertainment dollars on videogames that
fall below blockbuster status, according to analysts.
Wedbush Morgan Securities analyst Michael Pachter said the warning
was shocking. "You can't be that out of touch with the market," he
said.
Wall Street responded harshly to the lower forecast, sending shares
down 10% to $16.45 in after-hours trading. The stock gained nearly 11%
in 2009.
For the fiscal third quarter ended in December 31, EA expects
adjusted per-share earnings of 29 cents to 33 cents on revenue of
$1.23 billion to $1.25 billion, while analysts estimated earnings of
56 cents on revenue of $1.42 billion, according to a poll by Thomson
Reuters.
The company now expects fiscal-year adjusted earnings of 40 cents to
55 cents on revenue of $3.6 billion to $3.68 billion. Its November
forecast, which was reduced from its previous guidance, was for
earnings of 70 cents to $1 on revenue between $3.6 billion and $3.9
billion.
In November, EA reported its fiscal second-quarter loss widened as
the market for videogames remained weak, prompting another round of
job cuts.
With the video-game market in the doldrums, the company has been
moving into electronic book publishing and in November made a play to
bolster its position in Internet and wireless gaming with the purchase
of social-network games maker Playfish.
-By Ben Charny, Dow Jones Newswires; 415-765-8230;
ben.charny@dowjones.com
(Kathy Shwiff contributed to this report.)
--------------------------------------------------
PRESS RELEASE: Electronic Arts Updates Fiscal Year 2010 Outlook
REDWOOD CITY, Calif.--(BUSINESS WIRE)--January 11, 2010--
Electronic Arts (NASDAQ: ERTS) today announced that it expects GAAP
and non-GAAP net revenue and earnings per share for the fiscal year
ending March 31, 2010 to be below the financial guidance previously
provided on November 9, 2009. 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.
Fiscal Third Quarter -- Ended December 31, 2009
GAAP net revenue is expected to be $1.227 billion to $1.247 billion
and GAAP diluted loss per share is expected to be in the range of
$0.24 to $0.32. Non-GAAP net revenue is expected to be $1.33 billion
to $1.35 billion. Non-GAAP earnings per share are expected to be in
the range of $0.29 to $0.33. In the table provided below, Electronic
Arts has provided a reconciliation of the most comparable GAAP
financial measure to the non-GAAP financial measures used in this
press release.
Fiscal Year 2010 Expectations -- Ending March 31, 2010
GAAP net revenue is expected to be $3.6 billion to $3.675 billion
for fiscal year 2010 versus prior guidance of $3.6 billion to $3.9
billion. GAAP diluted loss per share is expected to be in the range of
$1.94 to $2.24 for fiscal year 2010 versus prior guidance of $1.20 to
$2.05. GAAP guidance does not include the impact of tax-related
charges that may arise in connection with the Playfish integration.
Non-GAAP net revenue is expected to be $4.125 billion to $4.2
billion for fiscal year 2010 versus prior guidance of $4.2 billion to
$4.4 billion. Non-GAAP earnings per share are expected to be in the
range of $0.40 to $0.55 for fiscal year 2010 versus prior guidance of
$0.70 to $1.00.
Conference Call
Electronic Arts will host a conference call today, January 11, 2010
at 2:00 pm PT (5:00 pm ET) to discuss the information contained in
this press release. Participants may access the conference call live
through a dial-in number or via webcast (http://investor.ea.com). The
live dial-in number is 877-440-5807, access code 220497. A dial-in
replay of the conference call will be available until January 18, 2010
at 719-457-0820, access code 220497. A webcast archive of the
conference call will be available for one year at
http://investor.ea.com.
Non-GAAP Financial Measures
Expected non-GAAP net income excludes the following items from
expected GAAP net income (USD, in millions):
Three Months Fiscal Year
Ended December 31, 2009 Ending March 31, 2010
---------------------------- ------------------------ ----------------------
Change in deferred net
revenue (packaged goods
and digital content) $103 $525
---------------------------- ------------------------ ----------------------
Estimated stock-based
compensation 42 165 to 170
---------------------------- ------------------------ ----------------------
Amortization of
intangible assets 17 60 to 65
---------------------------- ------------------------ ----------------------
Restructuring charges 100 to 105 150 to 160
---------------------------- ------------------------ ----------------------
Losses on strategic
investments 1 25
---------------------------- ------------------------ ----------------------
Loss on lease obligation 0 14
---------------------------- ------------------------ ----------------------
Difference between the (67) to (76) (103) to (131)
Company's GAAP and
non-GAAP tax expenses*
---------------------------- ------------------------ ----------------------
* The Company applies a fixed, long-term projected tax rate of 28
percent to its non-GAAP financial results.
To supplement the Company's unaudited condensed consolidated
financial statements presented in accordance with GAAP, Electronic
Arts uses certain non-GAAP measures of financial performance. The
presentation of these non-GAAP financial measures is not intended to
be considered in isolation from, as a substitute for, or superior to,
the financial information prepared and presented in accordance with
GAAP, and may be different from non-GAAP financial measures used by
other companies. In addition, these non-GAAP measures have limitations
in that they do not reflect all of the amounts associated with the
Company's results of operations as determined in accordance with GAAP.
These non-GAAP financial measures exclude the following items, as
applicable in a given reporting period, from the Company's unaudited
condensed consolidated statements of operations:
-- Acquired in-process technology
-- Amortization of intangibles
-- Certain abandoned acquisition-related costs
-- Change in deferred net revenue (packaged goods and digital content)
-- Goodwill impairment
-- Loss on lease obligation and facilities acquisition
-- Loss on licensed intellectual property commitment
-- Losses (gains) on strategic investments
-- Restructuring charges
-- Stock-based compensation
-- Income tax adjustments
Electronic Arts may consider whether other significant non-recurring
items that arise in the future should also be excluded in calculating
the non-GAAP financial measures it uses.
Electronic Arts believes that these non-GAAP financial measures,
when taken together with the corresponding GAAP financial measures,
provide meaningful supplemental information regarding the Company's
performance by excluding certain items that may not be indicative of
the Company's core business, operating results or future outlook.
Electronic Arts' management uses, and believes that investors benefit
from referring to, these non-GAAP financial measures in assessing the
Company's operating results both as a consolidated entity and at the
business unit level, as well as when planning, forecasting and
analyzing future periods. These non-GAAP financial measures also
facilitate comparisons of the Company's performance to prior periods.
Safe Harbor for Forward-Looking Statements
Some statements set forth in this release, including Electronic
Arts' expectations of its financial performance for the fiscal third
quarter ended December 31, 2009 and fiscal year 2010 guidance
information, contain forward-looking statements that are subject to
change. Statements including words such as "anticipate", "believe",
"estimate" or "expect" and statements in the future tense are
forward-looking statements. These forward-looking statements are
preliminary estimates and expectations based on current information
and are subject to business and economic risks and uncertainties that
could cause actual events or actual future results to differ
materially from the expectations set forth in the forward-looking
statements. Some of the factors which could cause the Company's
results to differ materially from its expectations include the
following: sales of the Company's titles during the remainder of
fiscal year 2010; the general health of the U.S. and global economy
and the related impact on discretionary consumer spending;
fluctuations in foreign exchange rates; consumer spending trends; the
Company's ability to manage expenses; the competition in the
interactive entertainment industry; the effectiveness of the Company's
sales and marketing programs; timely development and release of
Electronic Arts' products; the consumer demand for, and the
availability of an adequate supply of console hardware units
(including the Xbox 360(R) video game and entertainment system, the
PLAYSTATION(R)3 computer entertainment system and the Wii(TM)); the
Company's ability to predict consumer preferences among competing
hardware platforms; the financial impact of the Playfish acquisition
and potential future acquisitions by EA; the Company's ability to
realize the anticipated benefits of acquisitions; the seasonal and
cyclical nature of the interactive game segment; the Company's ability
to attract and retain key personnel; changes in the Company's
effective tax rates; the performance of strategic investments; the
impact of certain accounting requirements, such as the Company's
ability to estimate and recognize goodwill impairment charges and make
tax valuation allowances; adoption of new accounting regulations and
standards; potential regulation of the Company's products in key
territories; developments in the law regarding protection of the
Company's products; the Company's ability to secure licenses to
valuable entertainment properties on favorable terms; the stability of
the Company's key customers, and other factors described in the
Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 2009. These forward-looking statements speak only as of
January 11, 2010. Electronic Arts assumes no obligation and does not
intend to update these forward-looking statements. In addition, the
preliminary financial results set forth in this release are estimates
based on information currently available to Electronic Arts. While
Electronic Arts believes these estimates are meaningful, they could
differ from the actual amounts that Electronic Arts ultimately reports
in its Quarterly Report on Form 10-Q for the fiscal quarter ended
December 31, 2009.
About Electronic Arts
Click here to go to Dow Jones NewsPlus, a web front page of today's
most important business and market news, analysis and commentary:
http://www.djnewsplus.com/nae/al?rnd=afTsE3CHnyz8k7x0DZju/w==.
You can use this link on the day this article is published and the
following day.
=DJ Electronic Arts Cuts Year View On Weak Europe, Product Shift
DOW JONES NEWSWIRES
Electronic Arts Inc. (ERTS) lowered its fiscal-year guidance for the
second time in two months, mostly because of weakness in Europe in
December and a shift to lower-margin products in the latest quarter,
primarily in North America.
The video-game maker also forecast fiscal third-quarter results far
below Wall Street's expectations.
Shares sank 7.5% to $16.90 in after-hours trading. The stock has
gained 3% in the past year.
EA expects adjusted earnings for the quarter ended in December of 29
cents to 33 cents on revenue of $1.23 billion to $1.25 billion, while
analysts estimated earnings of 56 cents on revenue of $1.42 billion,
according to a poll by Thomson Reuters.
The company, known for its Rock Band and Madden video-game
franchises, now expects fiscal-year adjusted earnings of 40 cents to
55 cents on revenue of $3.6 billion to $3.68 billion. Its November
forecast, which was reduced from its previous guidance, was for
earnings of 70 cents to $1 on revenue of $3.6 billion to $3.9 billion.
In November, EA reported its fiscal second-quarter loss widened as
the market for videogames remained weak, prompting another round of
job cuts.
With the video-game market in the doldrums, the company has been
moving into electronic book publishing and in November made a play to
bolster its position in Internet and wireless gaming with the purchase
of social-network games maker Playfish.
=DJ UPDATE: Electronic Arts, Lacking Big Names, Cuts Views Again
(Updated throughout with analyst reaction and context.)
By Ben Charny
Of DOW JONES NEWSWIRES
Electronic Arts Inc. (ERTS) lowered its fiscal-year guidance for the
second time in two months as the world's top video game publisher
continues to suffer from a lack of compelling titles.
EA's warning comes as the company, which has some of the highest
development costs in the industry, is downsizing to focus on fewer
games amid an industry-wide slowdown sales. The Redwood City, Calif.,
company blamed its latest warning on weakness in Europe in December
and a shift to lower-margin products in the latest quarter, primarily
in North America.
Signal Hill Group analyst Todd Greenwald said the warning reflects
how the videogame industry's top two to three titles are selling well
at retail, but nothing else is. Activision Blizzard Inc.'s (ATVI)
"Modern Warfare 2" and other big-selling titles "are sucking the air
out of the rest of the market," Greenwald said.
Because EA doesn't publish as many top-selling titles as its rivals
do, the company--known for its Rock Band and Madden video-game
franchises--is especially susceptible to the recession-driven trend of
consumers not spending their entertainment dollars on videogames that
fall below blockbuster status, according to analysts.
Wedbush Morgan Securities analyst Michael Pachter said the warning
was shocking. "You can't be that out of touch with the market," he
said.
Wall Street responded harshly to the lower forecast, sending shares
down 10% to $16.45 in after-hours trading. The stock gained nearly 11%
in 2009.
For the fiscal third quarter ended in December 31, EA expects
adjusted per-share earnings of 29 cents to 33 cents on revenue of
$1.23 billion to $1.25 billion, while analysts estimated earnings of
56 cents on revenue of $1.42 billion, according to a poll by Thomson
Reuters.
The company now expects fiscal-year adjusted earnings of 40 cents to
55 cents on revenue of $3.6 billion to $3.68 billion. Its November
forecast, which was reduced from its previous guidance, was for
earnings of 70 cents to $1 on revenue between $3.6 billion and $3.9
billion.
In November, EA reported its fiscal second-quarter loss widened as
the market for videogames remained weak, prompting another round of
job cuts.
With the video-game market in the doldrums, the company has been
moving into electronic book publishing and in November made a play to
bolster its position in Internet and wireless gaming with the purchase
of social-network games maker Playfish.
-By Ben Charny, Dow Jones Newswires; 415-765-8230;
ben.charny@dowjones.com
(Kathy Shwiff contributed to this report.)
--------------------------------------------------
PRESS RELEASE: Electronic Arts Updates Fiscal Year 2010 Outlook
REDWOOD CITY, Calif.--(BUSINESS WIRE)--January 11, 2010--
Electronic Arts (NASDAQ: ERTS) today announced that it expects GAAP
and non-GAAP net revenue and earnings per share for the fiscal year
ending March 31, 2010 to be below the financial guidance previously
provided on November 9, 2009. 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.
Fiscal Third Quarter -- Ended December 31, 2009
GAAP net revenue is expected to be $1.227 billion to $1.247 billion
and GAAP diluted loss per share is expected to be in the range of
$0.24 to $0.32. Non-GAAP net revenue is expected to be $1.33 billion
to $1.35 billion. Non-GAAP earnings per share are expected to be in
the range of $0.29 to $0.33. In the table provided below, Electronic
Arts has provided a reconciliation of the most comparable GAAP
financial measure to the non-GAAP financial measures used in this
press release.
Fiscal Year 2010 Expectations -- Ending March 31, 2010
GAAP net revenue is expected to be $3.6 billion to $3.675 billion
for fiscal year 2010 versus prior guidance of $3.6 billion to $3.9
billion. GAAP diluted loss per share is expected to be in the range of
$1.94 to $2.24 for fiscal year 2010 versus prior guidance of $1.20 to
$2.05. GAAP guidance does not include the impact of tax-related
charges that may arise in connection with the Playfish integration.
Non-GAAP net revenue is expected to be $4.125 billion to $4.2
billion for fiscal year 2010 versus prior guidance of $4.2 billion to
$4.4 billion. Non-GAAP earnings per share are expected to be in the
range of $0.40 to $0.55 for fiscal year 2010 versus prior guidance of
$0.70 to $1.00.
Conference Call
Electronic Arts will host a conference call today, January 11, 2010
at 2:00 pm PT (5:00 pm ET) to discuss the information contained in
this press release. Participants may access the conference call live
through a dial-in number or via webcast (http://investor.ea.com). The
live dial-in number is 877-440-5807, access code 220497. A dial-in
replay of the conference call will be available until January 18, 2010
at 719-457-0820, access code 220497. A webcast archive of the
conference call will be available for one year at
http://investor.ea.com.
Non-GAAP Financial Measures
Expected non-GAAP net income excludes the following items from
expected GAAP net income (USD, in millions):
Three Months Fiscal Year
Ended December 31, 2009 Ending March 31, 2010
---------------------------- ------------------------ ----------------------
Change in deferred net
revenue (packaged goods
and digital content) $103 $525
---------------------------- ------------------------ ----------------------
Estimated stock-based
compensation 42 165 to 170
---------------------------- ------------------------ ----------------------
Amortization of
intangible assets 17 60 to 65
---------------------------- ------------------------ ----------------------
Restructuring charges 100 to 105 150 to 160
---------------------------- ------------------------ ----------------------
Losses on strategic
investments 1 25
---------------------------- ------------------------ ----------------------
Loss on lease obligation 0 14
---------------------------- ------------------------ ----------------------
Difference between the (67) to (76) (103) to (131)
Company's GAAP and
non-GAAP tax expenses*
---------------------------- ------------------------ ----------------------
* The Company applies a fixed, long-term projected tax rate of 28
percent to its non-GAAP financial results.
To supplement the Company's unaudited condensed consolidated
financial statements presented in accordance with GAAP, Electronic
Arts uses certain non-GAAP measures of financial performance. The
presentation of these non-GAAP financial measures is not intended to
be considered in isolation from, as a substitute for, or superior to,
the financial information prepared and presented in accordance with
GAAP, and may be different from non-GAAP financial measures used by
other companies. In addition, these non-GAAP measures have limitations
in that they do not reflect all of the amounts associated with the
Company's results of operations as determined in accordance with GAAP.
These non-GAAP financial measures exclude the following items, as
applicable in a given reporting period, from the Company's unaudited
condensed consolidated statements of operations:
-- Acquired in-process technology
-- Amortization of intangibles
-- Certain abandoned acquisition-related costs
-- Change in deferred net revenue (packaged goods and digital content)
-- Goodwill impairment
-- Loss on lease obligation and facilities acquisition
-- Loss on licensed intellectual property commitment
-- Losses (gains) on strategic investments
-- Restructuring charges
-- Stock-based compensation
-- Income tax adjustments
Electronic Arts may consider whether other significant non-recurring
items that arise in the future should also be excluded in calculating
the non-GAAP financial measures it uses.
Electronic Arts believes that these non-GAAP financial measures,
when taken together with the corresponding GAAP financial measures,
provide meaningful supplemental information regarding the Company's
performance by excluding certain items that may not be indicative of
the Company's core business, operating results or future outlook.
Electronic Arts' management uses, and believes that investors benefit
from referring to, these non-GAAP financial measures in assessing the
Company's operating results both as a consolidated entity and at the
business unit level, as well as when planning, forecasting and
analyzing future periods. These non-GAAP financial measures also
facilitate comparisons of the Company's performance to prior periods.
Safe Harbor for Forward-Looking Statements
Some statements set forth in this release, including Electronic
Arts' expectations of its financial performance for the fiscal third
quarter ended December 31, 2009 and fiscal year 2010 guidance
information, contain forward-looking statements that are subject to
change. Statements including words such as "anticipate", "believe",
"estimate" or "expect" and statements in the future tense are
forward-looking statements. These forward-looking statements are
preliminary estimates and expectations based on current information
and are subject to business and economic risks and uncertainties that
could cause actual events or actual future results to differ
materially from the expectations set forth in the forward-looking
statements. Some of the factors which could cause the Company's
results to differ materially from its expectations include the
following: sales of the Company's titles during the remainder of
fiscal year 2010; the general health of the U.S. and global economy
and the related impact on discretionary consumer spending;
fluctuations in foreign exchange rates; consumer spending trends; the
Company's ability to manage expenses; the competition in the
interactive entertainment industry; the effectiveness of the Company's
sales and marketing programs; timely development and release of
Electronic Arts' products; the consumer demand for, and the
availability of an adequate supply of console hardware units
(including the Xbox 360(R) video game and entertainment system, the
PLAYSTATION(R)3 computer entertainment system and the Wii(TM)); the
Company's ability to predict consumer preferences among competing
hardware platforms; the financial impact of the Playfish acquisition
and potential future acquisitions by EA; the Company's ability to
realize the anticipated benefits of acquisitions; the seasonal and
cyclical nature of the interactive game segment; the Company's ability
to attract and retain key personnel; changes in the Company's
effective tax rates; the performance of strategic investments; the
impact of certain accounting requirements, such as the Company's
ability to estimate and recognize goodwill impairment charges and make
tax valuation allowances; adoption of new accounting regulations and
standards; potential regulation of the Company's products in key
territories; developments in the law regarding protection of the
Company's products; the Company's ability to secure licenses to
valuable entertainment properties on favorable terms; the stability of
the Company's key customers, and other factors described in the
Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 2009. These forward-looking statements speak only as of
January 11, 2010. Electronic Arts assumes no obligation and does not
intend to update these forward-looking statements. In addition, the
preliminary financial results set forth in this release are estimates
based on information currently available to Electronic Arts. While
Electronic Arts believes these estimates are meaningful, they could
differ from the actual amounts that Electronic Arts ultimately reports
in its Quarterly Report on Form 10-Q for the fiscal quarter ended
December 31, 2009.
About Electronic Arts
Click here to go to Dow Jones NewsPlus, a web front page of today's
most important business and market news, analysis and commentary:
http://www.djnewsplus.com/nae/al?rnd=afTsE3CHnyz8k7x0DZju/w==.
You can use this link on the day this article is published and the
following day.
=DJ Electronic Arts Cuts Year View On Weak Europe, Product Shift
DOW JONES NEWSWIRES
Electronic Arts Inc. (ERTS) lowered its fiscal-year guidance for the
second time in two months, mostly because of weakness in Europe in
December and a shift to lower-margin products in the latest quarter,
primarily in North America.
The video-game maker also forecast fiscal third-quarter results far
below Wall Street's expectations.
Shares sank 7.5% to $16.90 in after-hours trading. The stock has
gained 3% in the past year.
EA expects adjusted earnings for the quarter ended in December of 29
cents to 33 cents on revenue of $1.23 billion to $1.25 billion, while
analysts estimated earnings of 56 cents on revenue of $1.42 billion,
according to a poll by Thomson Reuters.
The company, known for its Rock Band and Madden video-game
franchises, now expects fiscal-year adjusted earnings of 40 cents to
55 cents on revenue of $3.6 billion to $3.68 billion. Its November
forecast, which was reduced from its previous guidance, was for
earnings of 70 cents to $1 on revenue of $3.6 billion to $3.9 billion.
In November, EA reported its fiscal second-quarter loss widened as
the market for videogames remained weak, prompting another round of
job cuts.
With the video-game market in the doldrums, the company has been
moving into electronic book publishing and in November made a play to
bolster its position in Internet and wireless gaming with the purchase
of social-network games maker Playfish.
