EA plans to cut jobs as game gets tough

The gaming company is losing revenue as sales of packaged games drop off. Photo / Thinkstock
The gaming company is losing revenue as sales of packaged games drop off. Photo / Thinkstock

Electronic Arts, the second largest US video-game publisher, plans to cut jobs as forecasts for the current quarter and fiscal year fall short of analysts' estimates.

In a statement yesterday, the company forecast a fiscal first-quarter loss of US40-45c a share, excluding items.

Analysts on average had estimated a loss of US33c, according to data compiled by Bloomberg.

The company is grappling with shrinking sales of packaged games and will incur a US$40 million ($50.9 million) charge to cut jobs and terminate licences in that older business.

A new online title from PopCap Games, a company acquired last year for as much as US$1.3 billion, won't be out this quarter, said Michael Pachter, an analyst with Wedbush Securities.

"They planned on a PopCap social game this quarter, which is clearly not happening," Pachter said. "There's also probably a bit of conservatism at play here."

Sales for the fiscal first quarter ending June 30, excluding items such as changes in deferred revenue, will be about US$500 million, Electronic Arts said. Analysts were predicting US$586.6 million on that basis.

Retail sales are being hurt by a lack of titles in comparison to a year ago, when Dead Space 2 and other properties were released, chief executive John Riccitiello said.

Electronic Arts is seeing double-digit growth in sales of mobile games, titles played for free on social sites such as Facebook and on company websites, Riccitiello said.

The company will end the year with about the same number of employees as it continues hiring outside the package goods area, according to spokesman John Reseburg.

Riccitiello also said the company would delay a major title into the next fiscal year.

The company is spending US$80 million this year related to titles for a new generation of consoles, he said.

Electronic Arts projected US$4.3 billion in adjusted revenue for the year, short of the US$4.51 billion average estimate of 20 analysts, and full-year adjusted profit of US$1.05 to US$1.20 a share, compared with US$1.16 seen by analysts.

Fiscal fourth-quarter net income rose to US$400 million, or US$1.20 a share, in the period ended March 31, from US$151 million, or US45c, a year earlier, Electronic Arts said.

Profit minus some items totalled US17c, beating the US16c average of analysts' estimates.

Sales excluding exceptional items totalled US$977 million, topping analysts' projections of US$958.4 million. Total sales increased 26 per cent to US$1.37 billion from US$1.09 billion a year earlier.

ELECTRONIC ARTS
* Second biggest US video game publisher.
* US$4.3 billion forecast of adjusted revenue.
* Titles include Star Wars and FIFA soccer.
* US$40 million charge, including cutting jobs.

- Bloomberg

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