EA loses $195 million, closes Chertsey facility

via Games Industry


EA has announced financial results for the second quarter, with a net loss of USD 195 million.

Net revenue was USD 640 million, down 18 per cent from the prior year. Gross profit was USD 245 million, down 45 per cent year-over-year.

Sales were driven by Madden NFL 08, FIFA 08, NCAA Football 08, Tiger Woods PGA Tour 08, and My Sims, each selling over one million copies. Madden NFL 08 sold 4.5 million copies and was EA's best performing title in the quarter.

The company released 58 SKUs across 13 platforms in Q2.

Net loss for the quarter was $195 million as compared with net income of USD 22 million for the prior year. Diluted loss per share was USD 0.62 as compared with earnings per share of USD 0.07 for the prior year.

"Our strategic priorities on quality, innovation and managing cost are showing progress," said EA CEO John Riccitiello.

"Highly accessible new properties like Skate and MySims have broken through with consumers and EA Sports continues to deliver great experiences on every platform. We've also announced a restructuring as part of a plan to better align cost with revenues."

On October 29, EA's Board of Directors approved a reorganisation plan that will result in the closing of certain facilities, including EA's facility in Chertsey, England.

The company will also be "relocating and/or eliminating certain job positions, incurring costs in connection with lease and other contract terminations, and incurring IT and consulting costs to assist in the reorganization of business support functions." It expects that these actions will result in pre-tax cost savings of approximately USD 25 to 30 million.

With a 12 per cent share in North America, and an estimated 13 per cent share in Europe, EA is the number one third-party publisher on the Nintendo Wii this year to date.

EA will be launching over ten titles this holiday season, including The Simpsons Game, Need for Speed Pro Street, Hellgate: London, Rock Band, NBA Live 08, SimCity Societies and Crysis.

Net revenue for Q3 is expected to be between USD 1.325 and 1.575 billion. For the fiscal year ending in March 2008, the company expects net revenue of USD 3.35 and 3.65 billion, up USD 150 million from previous guidance.

Update: During a conference call, CEO John Riccitiello commented upon the new 40GB PS3 and recent 80GB PS3 price cut, noting that the company would look at the hardware sell-through numbers after Thanksgiving. "We remain supremely confident that this is a three-horse platform race," said John Riccitiello.

He expressed a certain amount of surprise at EA's current position as the number one third-party developer on the Wii, something he said he never would have foreseen when he returned to the company in April.

Following up on recent comments about the need for change in the current videogame market business model, he noted that EA would be testing new pricing models in Asia during fiscal 08 and 09. Some non-core titles in the Western market may also be subject to the new pricing models, but he did not elaborate.

He expects Rock Band to be a hot product, recommending that people wait in line on November 19th if they want to obtain the "band in a box," noting that EA won't initially be able to produce enough supply to meet the expected demand.

Finally, Riccitiello noted that the title that EA is working on in collaboration with Stephen Spielberg is scheduled for a Q4 release, with the next Warhammer game to be released in the first half of fiscal year 2009.