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Electronic Arts: Sales down, but so are losses

November 2, 2010 |  4:17 pm

With fewer titles released this year, second-quarter sales fell 20% at Electronic Arts Inc. compared with a year earlier. However, the video game publisher sliced its net loss in half thanks to aggressive cost cutting and a shift to fewer, but more profitable franchises.

The Redwood City, Calif., developer of Madden football and FIFA soccer titles posted $631 million in revenue for the quarter ended Sept. 30, down from $788 million a year earlier. Its loss of $201 million, or 61 cents a share, compared with a $391 million loss, or $1.21, in 2009.

EA had projected lower sales, mostly because it released seven titles in the quarter, compared with nine last year. Its biggest title of the quarter was FIFA Soccer 11, which gave EA a revenue kick. Released on Sept. 28 in North America and Oct. 1 in Europe, the game has sold 8 million copies worldwide.

Whether the games business is growing or shrinking depends on which parts of the industry is being examined, John Riccitiello, EA's chief executive, said in a conference call with analysts.

Social games for Facebook and games for smart phones and mobile devices such as the iPhone and iPad grew more than 25% last quarter, while the market games played on Sony Corp.'s PlayStation 3 and Microsoft Corp.'s Xbox 360 are also growing "mid-teens," Riccitiello said.

But offsetting that growth is a 34% drop in games for Nintendo Co.'s Wii as well as Nintendo's portable Dual Screen console, according to Eric Brown, EA's chief financial officer. Music games such as Rock Band and Guitar Hero have also suffered double-digit declines as consumers mark off the category as last year's fad.

EA's results, which conform to generally accepted accounting principles, or GAAP, do not account for a portion of revenue EA received during the quarter for certain games that have online play. Instead, EA ammortizes the sales over several months.

Most investors and analysts pay more attention to the so-called non-GAAP figures, which look at all the revenue received during the quarter. Under those measures, EA posted a $32-million profit, or 10 cents a share, on $884 million in revenue. It made $19 million, or 6 cents, on sales of $1.15 billion a year earlier.

EA also on Tuesday announced a five-year agreement to exclusively use Facebook’s payment system for games played on the social network’s platform. EA had previously allowed players to use PayPal and other forms of payment. Facebook generally takes a 30% cut of the transactions processed by its system.

-- Alex Pham