Electronic Arts beats reduced earnings forecasts

Electronic Arts reported third fiscal quarter results today that were in line with the reduced expectations that analysts had.
For the third fiscal quarter ended Dec. 31, EA reported revenue of $1.24 billion, down fromm $1.64 billion a year ago. Net loss was $82 million, compared to a net loss of $641 million a year ago. Loss per share was 25 cents compared to a loss of $2 per share a year ago. On a non-GAAP basis, earnings per share were 33 cents a share, compared with 56 cents a share a year ago. Non-GAAP revenues were $1.35 billion, down 23 percent from $1.74 billion a year ago.
Analysts had expected non-GAAP revenues of $1.34 billion and non-GAAP earnings per share of 31 cents. EA had set its own guidance at $1.33 billion to $1.35 billion and EPS of 29 cents to 33 cents. EA had warned that it was going to have another tough quarter last month.
The good thing is that EA’s fourth fiscal quarter line-up looks good. The company has already released Mass Effect 2, which generated more than 2 million unit sales in its first week and high review scores, including a 9 out of 10 review rating by me. EA also released Army of Two: The 40th day in January. Still to come are Command & Conquer 4: Tiberian Twilight, Battlefield: Bad Company 2, and Dante’s Inferno (pictured) which debuts tomorrow.
Michael Pachter, an analyst at Wedbush Morgan, said in a note released last week that investors are likely to stay skeptical about EA until the fourth fiscal quarter is finished. EA is focusing on quality titles in its core console games business, but it has been forced to cut back on staff a couple of times due to weak sales in the past year.
Even as it lays off staff, it acquired Playfish, a maker of social games on Facebook, for as much as $400 million last fall. It is also investing heavily in free-to-play online games, the iPhone, and other new game platforms. EA said recently it will launch its NFL Madden football property on Facebook.
EA said that it has sold 9.7 million copies of its latest Fifa soccer game. Digital revenue, such as money from free-to-play online games, was an all-time high at $152 million. And EA said it has cut more than $100 million in operating expenses compared to a year ago. EA has a total of 1.9 million online game subscribers, and EA Mobile’s revenue this quarter was $57 million, up 14 percent from a year ago.
For its fourth fiscal quarter, EA forecasts it will have revenue of $925 million to $1 billion, on a GAAP basis. Non-GAAP revenue is expected to be $800 million to $850 million. Non-GAAP earnings per share are expected to be 2 cents to 6 cents. For the first fiscal quarter ending June 30, EA expects a loss of 35 cents to 40 cents per share on a non-GAAP basis. Revenues are expected to be $710 million to $750 million on a GAAP basis and $460 million to $500  million on a non-GAAP basis.
For the fiscal year ended March 31, 2011, EA expects GAAP revenues of $3.45 billion to $3.70 billion and non-GAAP revenues of $3.65 billion to $3.9 billion. It expects non-GAAP earnings per share of 50 cents to 70 cents.