Electronic Arts Holds Up After News Already Anticipated

Electronic Arts (ERTS-NASDAQ) posted revenues of $1.28 Billion and posted EPS of $0.63 on a non-GAAP basis and $0.50 net. Estimates were $1.27 Billion revenues and $0.57+, so it is a slightbeat.

Guidance is $550 to $600 million and non-GAAP EPS expected at $0.00 to $0.03, GAAP EPS is expected -$0.12 to -$0.17. Estimates for the coming quarter are $0.02 & $644 million.  While this is light, as a reminder the next quarter cycle is one of the two throwaway quarters for video gamers and isn’t a real test for a video game producer (particularly the largest one).

The Company also announced today that, starting in fiscal 2008, the Company will begin recognizing revenue associated with certain online-enabled packaged goods games over the estimated hosting service period. As a result, the Company anticipates that a significant amount of net revenue that otherwise would have been recognized in fiscal 2008 will be recognized in fiscal 2009.

Shares are actually up about 2% at $51.70 in after hours trading and that is after closing up 1% on the day. The 52-week high on ERTS is $59.85 and it had been sliding over the last two months.  So while the beat is good, the in-line to cautionary comments look like they are bing forgiven since the stock had already slid so much in the last 60 days.

Jon C. Ogg
February 1, 2007