PSP News: Electronic Arts (EA) Announces Q3 Fiscal 2006 Earnings - PSP News

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Electronic Arts (EA) Announces Q3 Fiscal 2006 Earnings

EA HQ EA has officially released their third-quarter earnings report. EA's Q3 ended December 31st, 2006 and began three months prior in October. Clearly, the Q3 earnings are the most important as the quarter covers the entire holiday shopping season. So normally the quarter is also EA's highest grossing. But 2006 saw something different for EA, as the fiscal Q3 revenue went from $1.27B to $1.28B - a very modest and miniscule increase for the company.

But it is the net income of the timeframe that managed to shock some, as EA's Q3 net-income tumbled nearly $100M in comparison to the same period in 2005. The 2005 Q3 brought EA $259M, where as the 2006 Q3 took $160M. Likewise, investors are likely not too thrilled with EA's EPS (earnings per share) dropping 33-cents from $0.83 to $.50. EA and Wedbush Morgan's analyst Michael Pachter were quick to put part of the blame on limited availability of the PS3. Though I beg to differ, as I personally don't see how a (at the time) one month console has anything to do with EA dropping 100M in quarterly income. It isnít like EA released anything that wasn't a port, or anything that was of higher than average quality. Regardless, CEO Larry Probst said he "was pleased with the performance of our products on next-generation consoles."

Wedbush Morgan's analyst Michael Pachter offered words that make a lot more sense in regards to this quarterly income, citing development costs as the primary reason for the decline. Pachter spoke to cNet's GameSpot and stated: "Earnings are lower because their R&D spending went from $206 million to $330 million. That's over $0.25 a share all by itself." It should be noted that EA spent an additional $23M acquiring developer Digital Illusions.

EA CFO Warren Jenson states: "The past several years have been about investment," he said. "The coming years are about growth and reward." Jenson was quick to also point out that in 2006 EA took in a record $115M from online content sales, which includes Xbox Live content and games sold on

Finally, for Q3 2006, EA's best sellers were: The Sims, Need for Speed: Carbon, and FIFA 2007. Worldwide, the Sims franchise took in an additional 10 million copies, 5 million alone came from The Sims 2: Pets. 8 million copies of NFS: Carbon were sold across every console you can imagine. And over 6 million copies of FIFA '07 made into the hands of gamers all around the globe. Madden NFL 07 sold 3 million copies in North America during the quarter; but over 8 million altogether. EA claims Madden is the most popular game in North America. Very impressive, considering sales of Madden are practically non-existent outside of NA.

2/1/2007 Arnold Katayev

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