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EA Comeback Taking Longer Than Expected

| 12 Jan 2010 15:04
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In the wake of reduced fiscal year guidance drove share prices down by more than eight percent, Electronic Arts CEO John Riccitiello said the company's comeback is making progress but taking longer than planned.

EA revealed yesterday that it had reduced its fiscal guidance for the year ending March 31 from $3.6 - $3.9 billion to $3.6 - $3.675 billion and said that losses are expected to run $1.94 - $2.24 per share, rather than the previously predicted $1.20 - $2.05 per share. Third quarter revenues are now anticipated to hit $1.227 billion - $1.247 billion, significantly lower than the $1.42 billion predicted by analysts.

The company's "digital direct business" is performing well, with growth in the 25-30 percent range, said Chief Financial Officer Eric Brown, but wasn't enough to compensate for slow sales of boxed products, which forced the lowered guidance.

The announcement caused share prices in EA to drop more than eight percent in after hours trading, eventually reaching as low as $16.69 per share. In spite of that, Riccitiello sounded upbeat about the future in a conference call to investors, although he admitted that the turn-around is going to take longer than the original two-year plan.

EA's strategy includes "bringing our intellectual property back to be the industry's best in quality and chart position; driving growth on the digital side; and driving cost," he said. "I think we've made good progress -- in fact, very good progress -- on these. Our view of the sector has been proven right, and we've done a good job of executing the right strategies."

"Where I think today we are is, frankly, it has taken longer," he continued. "What we've described as a two-year comeback is clearly taking longer. Part of that has to do with the dynamism in the sector. But... I think we've got the right strategies going forward and the right team executing them."

Despite his professed optimism, Riccitiello said EA doesn't expect to set the world on fire in 2010. "Given the recent history...we think it's appropriate for EA to plan conservatively at the sector level," he said. "We think the best assumption going into the year given, frankly, how wrong some of us were at estimating 2009, is to plan the sector to be down single digits or be good as flat. We think that's a good planning assumption."

Source: Gamasutra

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