Electronic Arts shares drop 7%

Video game industry still rocky

SAN FRANCISCO -- Electronic Arts shares slid nearly 7% on Wednesday after the game publisher's strong quarterly results failed to quell concerns about the industry's health and the company's game slate.

The "Madden" football publisher posted better-than-expected results in the June quarter and managed to double its revenue on titles for Nintendo's popular Wii console.

But CEO John Riccitiello warned analysts on a conference call that the industry remained weak and retailers continued to be cautious about ordering.

The company said it now expects 2009 sales of packaged software in North America and Europe to be little changed from 2008, versus a previous forecast for low- to mid-single-digit growth.

Although EA's non-GAAP revenue climbed 34% on strong sales of "The Sims 3" and "EA Sports Active," the company indicated some weakness in sales of the recently released "NCAA Football."

Analysts also expressed concern about titles for the remainder of the year.

"Electronic Arts lacks a critical mass of upcoming must-have titles with top-selling potential, particularly during this year's holiday period," MKM Partners analyst Eric Handler said in a research note.

"As such, we would not be surprised to see retailers take a more measured approach to stocking the company's games."

Handler also said EA's catalog business was 18% of revenue in the June quarter, down from 28% last year.

The video game industry as a whole has had a difficult year as consumers impacted by the economic downturn have been more reluctant to spend. June U.S. video game sales registered their biggest drop since 2000, according to research group NPD.

Shares of Redwood City, California-based Electronic Arts fell $1.51 to $20.38 in midday trade on the Nasdaq.
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