Electronic Arts Inc. (NASDAQ: ERTS) is scheduled to release its fiscal fourth-quarter earnings after the closing bell on Tuesday, May 4, 2011. Analysts, on average, expect the company to report earnings of 22 cents per share on revenue of $923.88 billion. In the year ago quarter, the company reported earnings of 7 cents per share on revenue of $850 million.
Electronic Arts Inc. develops, markets, publishes, and distributes video game software and content. During the fiscal year ended March 31, 2010 (fiscal 2010), the Company was organized into three Labels: EA Games, EA SPORTS and EA Play, its EA Interactive organization (EA Mobile, Pogo and Playfish) and Global Publishing Organization.
In the preceding third-quarter, the Redwood City, California-based company's net loss was $322 million, or 97 cents per share, compared to a loss of $82 million, or 25 cents per share, in the prior-year quarter. On an adjusted basis, the company earned 59 cents a share in the fourth quarter. Revenue increased to $1.05 billion from $1.24 billion. Analysts, on average, expected the company to report earnings of 57 cents per share on revenue of $1.44 billion.
At its last earnings call in February, EA revised fiscal 2011 earnings. The company said that it now expects full-year GAAP loss of 90 cents to a loss of 77 cents per share, and non-GAAP earnings of 60 cents to 70 cents per share. The company forecast GAAP net revenue of $3.473 billion to $3.573 billion, and non-GAAP net revenue of $3.682 billion to $3.782 billion. Last half of the 2011 fiscal year will include restructuring charges of about $180 million. Previously, the company expected GAAP loss of 55 cents to 85 cents per share, and non-GAAP earnings of 50 cents to 70 cents per share. The company expected GAAP revenue of $3.35 billion to $3.60 billion, and non-GAAP revenue of $3.65 billion to $3.90 billion.
Management believes that 2011 will be a strong year, driven by quality titles and robust growth in the Digital business.Electronic Arts forecasts Publishing and other revenue of $2.73 billion to $2.83 billion for fiscal 2011. Distribution revenue is expected to be approximately $200.0 million and Digital revenue to be $750.0 million for the fiscal year 2011. For fiscal 2011, non-GAAP gross profit margin is expected to be approximately 61%. Operating expense is expected to be approximately $2.0 billion. The company anticipates its top 20 titles, for fiscal year 2011, to generate roughly 77.0% of total packaged-goods revenue as compared with 76.0% in fiscal 2010. Electronic Arts, on a GAAP basis, expects operating cash flow in the range of $250.0 million to $300.0 million for fiscal 2011.
For fiscal 2012, Electronic Arts forecasts double-digit earnings growth on a non-GAAP basis, driven by aggressive growth from the Digital segment. Recently, CEO John Riccitiello told investors that the company has a strong slate of digital and retail games for the 2012 fiscal year and is aiming for “market leadership” in first-person shooter games
For the fourth quarter, the company expects GAAP earnings of 38 cents to 51 cents per share, and non-GAAP earnings of 15 cents to 25 cents per share. GAAP net revenue is expected to be about $975 million to $1.08 billion, while non-GAAP net revenue is expected to be about $850 million to $950 million. For the fourth quarter, gross profit margin is expected to be in the range of 67.0% to 68.0% and operating expense in the range of $505.0 million to $520.0 million.
The video game industry is undergoing a significant transition, with increasing contribution from digital downloads, used game sales, game rentals, subscriptions, social network games and mobile game apps as compared to retail sales. The consumer demand for video game is likely to increase with the gradual improvement in the overall U.S. economy for 2011. The sector has seen an increasing amount of its casual gamers shift towards gaming on smartphones or Facebook applications recently.
The company has cut costs, slimmed down its game portfolio, and begun issuing more cautious forecasts.EA has scaled back the number of titles in its development pipeline and is pushing further into digital through acquisitions of social gaming companies Playfish and Chillingo, the publisher of the popular Angry Birds title. In line with of its digital focus, EA recently acquired Melbourne-based tech start-up Firemint. EA has high hopes for an up-coming online multi-player "Star Wars" title being developed by its BioWare studio. The company already has two franchises performing at the level required: FIFA and Battlefield. Both brands have expanded into numerous business models and platforms, including mobile, Facebook, online free-to-play, and virtual item sales.
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