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Following on the release of EA's 2013 fiscal year earnings, executive chairman Larry Probst calls on the company to settle in for a lean console transition -- exec quotes inside.

Kris Ligman, Blogger

May 7, 2013

3 Min Read

Electronic Arts continues to face a rough road in the coming fiscal months, not simply from a flagging boxed retail market but also from the upcoming next-generation console transition. In the wake of SimCity's troubled launch, mass layoffs and the departure of CEO John Riccitiello, EA aimed to focus on the positives with its growing digital and mobile market. In its earnings call with investors and analysts following the posting of the company's 2013 fiscal year earnings, CFO Blake Jorgensen, president of EA Games label Frank Gibeau, and EA executive chairman Larry Probst -- who stepped in to temporarily replace Riccitiello while the Board of Directors continues its search for a new CEO -- expounded on the company's earnings data with a new plan of action for the 2014 fiscal year. Here are some highlights, excerpted from the earnings call Q&A follow below. The execs focused (heavily) on the positives, but we all know that console transitions, along with continuing massive shifts on other platforms, can make for very challenging times.

Gibeau on preparing for the next-gen

"Regarding next generation consoles, we are under a non-disclosure agreement with our platform partners, however, we're planning a full reveal at E3 including more next generation titles in development for FY14. "...I also want to call out a big accomplishment by the teams that built the development engines for our next generation of games -- Frostbite 3 engineered at DICE, and a brand new engine from EA Sports. These world class tech stacks are powering all of our development on the new systems. They provide an enduring common technology that saves cost, fosters efficiency, and provides spectacular physics and graphics for our games. "This isn't a vision -- these engines are fully functional right now and powering the games you'll see at E3 in June."

Gibeau on the SimCity fiasco

"SimCity [is] a great game that has recovered from a challenging launch. The short explanation for the launch is that the initial rush of consumers overwhelmed our game service, disrupting the consumer experience. As we stabilized the game and improved service in the first week, fans continued to pour in. So far we are ahead of forecast with more than 1.6 million units currently sold through to consumers. The digital story is particularly strong - nearly 50 percent of those sales were high-margin digital downloads. "The key takeaway here: SimCity is a highly resilient, global franchise with a long service life in front of it. But we learned our lesson and are now building better processes to anticipate and service demand. This won't happen again."

A lean transition

Jorgensen: "Our cost reduction plans will reduce our overall headcount by approximately 10 percent. ...Operating expenses will be impacted by the severance payments [of recent layoffs] and we expect our total non-GAAP operating expenses to be $530 million." Probst: "I'm pleased to say we have locked a plan that delivers higher revenue while keeping our operating costs essentially flat. Doing that in the middle of a hardware transition will be a challenge - something we've never done in the 31-year history of this company. But we are committed to making it work. "...This is a time when we tighten our belts and position the company for future growth and success."

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