EA reports smaller than expected loss

Electronic Arts today released financial results for the first quarter that ended on June 30 of this year. While the news is grim, there is somewhat of a silver lining for one of the world’s largest game publishers. First and foremost, changes in accounting rules for deferred revenue impacted sales for the quarter coupled with a seasonal slump in the industry during the three month period.

EA reported a loss of $234 million, or 72 cents per share, before adjustments in the April to June period, compared with a loss of $95 million, or 30 cents per share, in the same quarter a year earlier. During the quarter, the company recorded a net revenue deferral of $172 million related to online-enabled packaged goods games and digital content as compared with a net benefit of $195 million in the first quarter of the prior year.

Revenue for the quarter also fell 20 percent to $644 million from $804 million a year ago. Excluding restructuring charges and various adjustments, EA lost 2 cents per share in the latest quarter. The good news is that EA managed to beat “the street,” who expected the company to post a loss of around 13 cents a share.

Some other good news: adjusted revenue for the first quarter clocked in at $816 million, up an impressive 34 percent from last year - way above the $729.5 million range that analysts had predicted.

Highlights for the first quarter included doubling sales of Wii games thanks to EA Sports Active (which sold over 1.8 million copies), 3.7 million copies of The Sims 3, $50 million of non-GAAP revenue in the quarter from EA Mobile (up 14 percent), and EA Digital non-GAAP revenue of $124 million (up 38 percent year-over-year).

Looking ahead the company expects better days in the second quarter. Madden NFL 10, which will be available on August 14 for various platforms, should give EA a large boost in sales numbers. EA also plans to sell virtual items in The Sims 3, as well as subscription-based online games - though that particular space, save Ultima Online, hasn’t been a successful sector for EA over the years.

EA expects GAAP net revenue to be between $3.7 and $3.85 billion; non-GAAP net revenue of approximately $4.3 billion; a GAAP diluted loss per share between $0.85 and $1.35; and non-GAAP diluted earnings per share of approximately $1.00.

PS3 Price Cut Rumor Mongering

The PlayStation 3 will be getting a price cut, with an announcement coming  “in days” according to Janco Partners’ Mike Hickey. hickey is citing rumblings, whispers and “increased speculation” in retail channels that a price cut is imminent. In a note to investors Hickey said that Sony needs to cut the price of the PS3 by $100 USD to remain competitive. I’ve been saying that for almost a year.

Without that price cut, Hickey speculates that PS3 units will sit on store shelves, gather dust and see companies that make software and hardware move their resources to other platforms. Always a bride’s maid, never a bride. At least Sony has its health.

Some other juicy speculation: there’s a rumor floating around retail channels (we assume) that Sony might be planning an SKU without the Blu-Ray player, which would certainly make it easier to sell at a lower price. The big problem with that rumor is that there’s no feasible way such an SKU could work because PS3 software requires a Blu-Ray player.

We’ll have more on this story as it develops - or as the case may be - is proven to be a bucket full of bullshit.

thanks, Gi.biz

Major Sony Year End Loss Expected

Sony will post its first yearly loss in 14 years. Stop and think about that for second before you continue reading. The company hasn’t had such a loss since 1995. Chalk it up to bad electronic hardware sales in Europe and North America including high-definition television sets, cameras and the PS3. Japanese newspaper the Nikkei reported Tuesday that analysts predict a 100 billion yen ($1.1 billion) operating loss this fiscal year ending March.

Daiwa Institute of Research analyst Kazuharu Miura predicts that the company will post a heavy loss of 110 billion yen ($1.2 billion), which reflects the company’s core business operations. In better days Sony’s problems would be offset in another succesful division. Video games always proved to be a safe bet for the company, as an example.. But with a global recession underway and lackluster sales of the PS3 not propping up the company’s year-end numbers, a loss is to be expected.

Elsewhere Wedbush Morgan analyst Michael Pachter predicts that Sony will cut the price on the PS3 later this year. He also predicts a similar cut for the Xbox 360 that will keep things competitive right around the time E3 rolls out, and no cut for the Wii. While a price cut would be welcomed, SCEA has been resistant to lowering the price of the system because it has finally begun to turn a profit. Cutting the price would probably change that.

Eidos Ripe for Warner Takeover?

It’s no secret these days that video game publisher Eidos is struggling. We’ve already reported on potential buyout talks more than once. Recently, we even reported that Warner Bros. had taken the opportunity to bulk up on its stake in the troubled publisher, increasing its Eidos holdings to a total of about 20 percent. Now, it’s beginning to look more and more like Warner could be positioning itself to take a more active role in the day to day operations at Eidos.

The first sign pointing to a potential Warner takeover of Eidos is actually built on a foundation made of LEGO. Back in 2007, Warner first set things in motion to acquire Traveller’s Tales, the developer behind the hit LEGO Indiana Jones and LEGO Batman games. Earlier this week, while addressing investors at a conference in Arizona, Warner’s Chief Financial Officer John Martin called the acquisition “wildly successful”.

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Pachter: Game Industry Recession Proof

Analyst Michael Pachter, who some believe is the second coming, says that that the interactive entertainment is pretty much recession proof. Is the video game industry bullet proof when it comes to our lagging economy? The Wedbush Morgan Securities analyst thinks that, while there might be a slight decline in the sector for Sept., it will nonetheless be pretty darn profitable. But Pachter attributes this mostly to not having a killer app like Halo 3 to bolster software and hardware sales - at least for Microsoft and not the state of the economy or consumer confidence.

So what are his predictions for the Sept. numbers coming this Thursday from NPD? Sales will be down six percent to $620 million, compared to Sept. 2007 numbers due to no killer apps like Halo 3 - he says that if you ignore the Halo 3 effect, the numbers would show an increase of 44 percent. Other predictions include 600,000 Wii sales, 550,000 DS sales, around 300,000 Xbox 360 sales, PS3 sales of 175,000 and PSP sales of 200,000.

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