Electronic Arts Inc.: Better Days Ahead?

Company expects to rebound from an industrywide slowdown with upcoming releases of new video game consoles.

Executives at Electronic Arts Inc. are as excited as their customers about the scheduled Nov. 17 release of Sony Corp.'s PlayStation 3 (PS3) video game console. That's because the Redwood City, Calif.-based company, the world's largest video game publisher and one of IndustryWeek's IW 50 Best Manufacturers for 2006, unveiled on Oct. 19 its latest versions of some of its most popular games for the PS3.

The new releases should jump-start lagging sales. In its first fiscal quarter for 2007, which ended June 30, the company lost $81 million, or 26 cents per share, compared with $58 million, or 19 cents per share a year earlier. EA expects sales to be flat to down 5% in 2006, according to Reuters. But the company will likely update its sales outlook when it releases results for its second quarter in November.

"Business is tracking ahead of expectations. . . . I think Christmas is going to be good, EA Chief Executive and Chairman Lawrence Pobst told Reuters in a story published Oct. 9. "The tough times are over, and momentum is starting to build."

EA has more than 30 games in development for the PS3. When the PS3 hits store shelves in November, EA will begin offering new versions of traditional best sellers including Madden NFL 07, Tiger Woods PGA Tour 07 and Need for Speed Carbon. EA will release eight to 10 games on the PS3 by late March, including EA Sports Fight Night Round 3 and Def Jam: Icon.

"Each game has been custom designed to leverage the hardware power of the PlayStation 3 and serve as a launch pad for EA's next generation of HD gaming," said Paul Lee, president of EA Studios, in an Oct. 19 statement. "This is only the beginning. In the months and years to come, developers will take greater advantage of the PlayStation 3's cell processors and Blu-ray storage capacity to create games of stunning depth and texture."

Executives cited the release of PlayStation 3 and other game consoles as part of its development efforts in the company's 2007 first-quarter report.

"We look forward to our slate of fall launches, and the excitement surrounding next-generation software," said Warren Jenson, chief financial and administrative officer, in the Aug. 1 report. "While the risks of this technology transition remain very real, our franchises are well positioned for opportunities ahead."

Electronic Arts Inc.
At A Glance


Electronic Arts Inc.
Redwood City, Calif.
Primary Industry: Publishing and printing
Number of employees: 7,200
2005 In Review
Revenue: $3.1 billion
Profit Margin: 16.11%
Sales Turnover: 0.72
Inventory Turnover: 20.44
Revenue Growth: 5.81%
Return On Assets: 14.82%
Return On Equity: 18.82%

The company also is looking forward to Nintendo's new controller for its Wii console, which features a wireless controller that responds to a player's body movements.

"We are going to be more prolific on that platform than we had originally planned," Probst told Reuters.

EA is developing seven Wii games for 2007 and is planning another 10 to 12 games for fiscal 2008, Reuters reports.

Meanwhile, developers working on the new PS3 games are now operating out of a new studio in downtown Chicago. EA Chicago is one of the fastest-growing studios at the company with 150 employees currently on staff. EA plans to add 100 more developers by next year.

EA chose Chicago for its new studio because of its centralized access to Midwest talent and its attractive business climate.

"We are pushing next-generation development and technology to the limits and looking for the best talent to help us create innovative games," said Kudo Tsunoda, vice president and general manager of EA Chicago, in an Oct. 25 statement."We are in a great location downtown in a unique building that gives us access and visibility to the best resources and creative minds of this thriving city."


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