EA slashes 2013 outlook as video game industry struggles

Electronic Arts Inc slashed its fiscal 2013 earnings forecast after a weaker-than-expected holiday quarter marked by disappointing sales of its “Medal of Honor” title, as the industry struggles with flagging demand.

The games maker forecast non-GAAP revenue for the year to end-March of $3.8 billion to $3.9 billion and earnings of $0.86 to $1.00 per share from $1.00 to $1.15 per share previously, down about 13 percent at the mid-point.

Chief Financial Officer Blake Jorgensen said the earnings forecast had been adjusted downward, to take into account uncertainties in the seasonally weaker March quarter.

“The economy hasn’t gotten any stronger,” he told Reuters in an interview. “It’s a little early for me to know how strong the market’s going to be, so based on that we widened our range for revenue for the fourth quarter and brought our guidance down slightly just to make sure we’re prudent.”

Wedbush Securities analyst Michael Pachter said Electronic Arts was being “overly conservative” with its guidance after its big holiday release “Medal of Honor: Warfighter” underperformed.

“They were a little shell-shocked by how bad holiday demand was, and I think at the low end they’re probably assuming demand is down 20 percent or so,” Pachter said.

Electronic Arts is betting on several high-profile releases later in the quarter to help rev up sales. The latest installment of the popular “SimCity” will launch in March, and action-horror title “Dead Space 3” is due next week — two of just four major games that Electronic Arts has lined up in the fourth quarter.

New hardware could also potentially boost sales in the troubled video game sector, according to analysts. Consumers are holding back from buying hardware and software as they wait for rumored next-generation versions of Sony Corp‘s PlayStation and Microsoft Corp‘s Xbox, expected later this year.

“The guidance pretty clearly represents a lot of uncertainty in the market and that uncertainty stems from recent performances as consumers are pretty aware of new consoles coming,” said BMO Capital Markets analyst Edward Williams.


For the three months ended December 31, the company posted net revenue of $922 million, compared with $1.06 billion a year ago. It reported a net loss of $45 million, or 15 cents per share, compared with $205 million, or 62 cents per share a year ago.

Adjusted revenue fell 28.5 percent to $1.18 billion from a year ago, short of analyst estimates of $1.29 billion, according to Thomson-Reuters I/B/E/S.

“The revenue shortfall was a result primarily of a miss with our Medal of Honor title and stronger than expected sector headwinds for console packaged goods,” Chief Executive Officer John Riccitiello said in an earnings call with analysts.

Adjusted earnings per share of 57 cents was slightly above Wall Street’s expectation of 56 cents per share.

Besides the traditional console game business Electronic Arts has been growing its digital games business. Revenue from games for mobile devices was a bright spot as it generated $86 million in the third quarter, up about 23 percent from a year ago in the same period.

Shares of Electronic Arts were down 3.5 percent at $14.55 in after-hours trading, after closing at $15.08 on Wednesday.

Riccitiello told analysts the company had seen little impact from the gun debate now gripping much of the country, along with a backlash from critics against violence in the media and games.

Video game industry executives, including Riccitiello, met with Vice President Joe Biden this month to discuss gun violence in the aftermath of the recent elementary school shooting in Newtown, Connecticut.

“No, we’re not seeing any softness in the first-person shooter sector,” Riccitiello said when an analyst on the earnings call asked if the debate on game violence could hurt sales of action titles.

Riccitiello said studies have shown no link between violent video games and violent acts like mass shootings.

“We are responsible, we are mature, and we intend to be part of the solution,” he said.

(Reporting By Malathi Nayak; Editing by Richard Pullin)

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EA slashes 2013 outlook as video game industry struggles