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EA CEO: 'Two-Year Comeback Is Clearly Taking Longer'

Electronic Arts' ongoing "comeback" strategy is going in the right direction, says CEO John Riccitiello -- but reduced outlook has forced him
Electronic Arts' ongoing "comeback" strategy is going in the right direction, says CEO John Riccitiello -- but he admitted it's "taking longer" than the original two-year plan. Over the past few years, EA has been engaging in "three key strategies" to push its business forward, Riccitiello said during a conference call following reduced financial expectations: "bringing our intellectual property back to be the industry's best in quality and chart position; driving growth on the digital side; and driving cost." "I think we've made good progress -- in fact, very good progress -- on these," the CEO claimed during the call. "Our view of the sector has been proven right, and we've done a good job of executing the right strategies." "Where I think today we are is, frankly, it has taken longer," he admitted. "What we've described as a two-year comeback is clearly taking longer. Part of that has to do with the dynamism in the sector. But...I think we've got the right strategies going forward and the right team executing them." Some aspects of that three-pronged strategy are already performing better than planned, said CFO Eric Brown. For example, he said, "our digital direct business showed upside versus our expectations." However, that success was "not enough to offset the packaged goods shortfall" that led EA to lower its fiscal year guidance today. Brown said EA's digital business has been "pretty consistently performing in 25 to 30 percent growth track" through the last calendar year, including during the holiday season quarter. Looking forward, EA expects internally-developed games like Army of Two: The 40th Day, Dante's Inferno, Mass Effect 2, Battlefield Bad Company 2, and Command & Conquer 4 to drive revenue and margins, as well as DLC-based sales. Riccitiello said the company's digital sphere is growing strongly with "existing initiatives," and pointed out that this will be EA's first "full year of Playfish," the recently-acquired social gaming firm. And in 2011, EA expects to launch a "major MMO" -- likely BioWare's Star Wars: The Old Republic. Still, for 2010, company leadership is taking a conservative view of the market. "Given the recent history...we think it's appropriate for EA to plan conservatively at the sector level," Riccitiello said. "We think the best assumption going into the year given, frankly, how wrong some of us were at estimating 2009, is to plan the sector to be down single digits or be good as flat. We think that's a good planning assumption."

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