Electronic Arts posts wider quarterly loss

SAN FRANCISCO Thu Aug 2, 2007 1:17am BST

A screenshot from Electronic Arts' ''Harry Potter and the Order of the Phoenix.'' Electronic Arts Inc, the world's biggest video game publisher, posted a smaller-than-expected quarterly loss on Wednesday due to a boost from hits such as its latest ''Harry Potter'' title. REUTERS/Electronic Arts/Handout

A screenshot from Electronic Arts' ''Harry Potter and the Order of the Phoenix.'' Electronic Arts Inc, the world's biggest video game publisher, posted a smaller-than-expected quarterly loss on Wednesday due to a boost from hits such as its latest ''Harry Potter'' title.

Credit: Reuters/Electronic Arts/Handout

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SAN FRANCISCO (Reuters) - Electronic Arts Inc ERTS.O, the world's biggest video game publisher, posted a smaller-than-expected quarterly loss on Wednesday due to a boost from hits such as its latest "Harry Potter" title.

Electronic Arts also raised its revenue forecast for the full year, citing strong buzz for upcoming music game "Rock Band," which it is distributing on behalf of MTV VIAb.N.

Chief Executive John Riccitiello said he was counting on "Rock Band" and other expected hits such as "Madden NFL 08" to reverse a slide in EA's market share.

"They clearly over performed in Q1. Q2 was a little weaker in terms of guidance, but importantly for fiscal 2008 they actually raised their top line," said Mike Hickey, an analyst with Janco Partners.

"The first blush is this company is performing as expected and we continue to see upside," Hickey said.

EA said revenue for its current, second quarter would be between $825 million and $910 million, below the $953 million that was the average analyst forecast on Reuters Estimates.

But the company raised its full-year revenue forecast by $50 million, to between $3.65 billion and $3.85 million. Wall Street had been estimating revenue of $3.69 billion.

Those estimates exclude the effects of an accounting change that means EA will book revenue from online-enabled games as subscriptions over several quarters rather than all at once at the time of sale.

"'Rock Band' looks very, very strong so we felt pretty comfortable taking up our topline range by the $50 million," Chief Financial Officer Warren Jenson said.

Shares in EA, whose other key franchises include "The Sims" and "Need for Speed," initially fell 1.5 percent in extended trading but then recovered to trade up 10 cents at $48.20.

The stock has risen nearly 4 percent over the past year but has lagged shares of rivals such as Activision Inc (ATVI.O), which has seen its market share surge on the back of its hit "Guitar Hero" music game franchise and movie-related titles.

EA was also caught flat-footed by the unexpected success of Nintendo Co. Ltd.'s 7974.OS Wii console, which has outsold Microsoft Corp.'s (MSFT.O) Xbox 360 and Sony Corp.'s (6758.T) PlayStation 3 this year.

Faced with rising production costs linked to Xbox 360 and PS3 games, Riccitiello in June announced a reorganization of EA into four game labels as part of a drive aimed at making the company more efficient.

"We have to manage the cost line and have to manage the top line. I'll tell you point blank this cycle is developing quite differently than the last cycle," Riccitiello said.

"The last time, we were riding the right wave with the PS2. This time we have unexpected strength from the Wii and the PS3 hasn't yet performed as we expected it to, that's probably had biggest impact on our margins."

Saying EA's dwindling market share was "not acceptable," Riccitiello said he expected EA to regain most of that as dozens of new games hit store shelves over the coming months.

"We have a strong slate. Make no mistake, the competition will be out in full force, but we will be too," he said.

Net loss for EA's fiscal first quarter ended June 30 was $132 million, or 42 cents per share, compared with a loss of $81 million, or 26 cents per share, a year earlier.

Excluding special items such as stock-based compensation, EA said it lost $69 million, or 22 cents per share, comfortably beating the average Wall Street forecast on Reuters Estimates for a loss of 34 cents.

Revenue was $395 million, down 4 percent from $413 million a year earlier but higher than the $384.9 million expected by analysts.

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