EA Sees Larger Loss, Ramps Up Wii Production

Electronic Arts has announced its Q1 results, revealing an increased loss, and a packed conference call included new information on Nintendo Wii and DS, skepticism on PS3's shipment amounts, and commentary on the changes to E3.
Electronic Arts has announced its Q1 results, revealing revenues of $413 million, up 13 percent from last year, but net loss increased for the quarter to $81 million, as compared with $58 million for the prior year. According to the company, the results were driven primarily by sales of 2006 FIFA World Cup, Battlefield 2: Modern Combat, Need for Speed Most Wanted, The Sims 2, and Fight Night Round 3, with the Xbox 360 being a particular highlight for the firm. Talking in the conference call following the announcement, EA executives particularly noted that "...we have ramped up [game] production for the Wii and DS Lite", following significant excitement over the Nintendo-created consoles at E3. The company revealed that it would probably ship 2 titles for the Wii launch period (Madden and Need For Speed), and 5 titles over the fiscal year ending March 2007. Regarding Wii pricing, EA execs simply commented that publishers would have to decide on pricing themselves, but that Nintendo had indicated that first-party Wii titles would not be priced at more than $49.99 - suggesting that Electronic Arts games may debut for Wii at $49.99 at launch, though they did not state this specifically. In addition, execs revealed that there would be 4 or 5 launch titles on the PS3, including Madden, Need For Speed, and Tiger Woods - the 'launch period' being the 2006 calendar year. EA execs also expressed skepticism that Sony would actually make it to 6 million units PlayStation 3 units manufactured in the 2006-7 fiscal year, commenting both that "hardware companies come up a little short", and that "we expect that they will be challenged" to make that number - not necessarily good news for consumer confidence in Sony's launch. Further asked about PS3 vs. Xbox 360 graphical and technical performance for this holiday season, it was suggested that PlayStation 3 and Xbox 360 games will look "more alike than different", with additional commentary: "There's a lot of horsepower in the PS3 that we're going to be able to unlock in years two, three, and four." Discussing the E3 change, EA execs commented: "We think it makes good business sense", and noted that the change "will save the company multiple million of dollars." Also noted: "Obviously, E3 is the primary revenue driver for the ESA - there are going to be some due assessments that are different to what they have been historically" - but EA still believed that it would be a big cost saver for them. Some highlights for the company - North American revenues were up 14 percent to $209 million, in Europe, revenues were up 17 percent to $169 million, and in Asia sales were down five percent to $35 million. Overall cellular handset net revenue was $33 million, up $32 million, thanks to the acquisition of mobile game publisher and developer Jamdat. Asked about the coming console wars, EA indicated that "probably have a market expansion effect" "We're pleased to be the leading publisher on the Xbox 360," said Larry Probst, Chairman and Chief Executive Officer. "We are on schedule with strong support for the launch of PlayStation 3 and we have increased our development efforts for the Nintendo DS and Wii." Looking forward for the full financial year ending March 31, 2007, the company's net revenue is expected to be between $2.8 and $3.0 billion, with a diluted loss per share between ($0.30) and breakeven.

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