EA Delivers, Outside of Deferred Numbers (ERTS)

Electronic Arts (NASDAQ:ERTS) posted non-GAAP EPS of $0.27 on revenues of $640 million; Analysts were looking for $0.20 EPS on $896 million revenues but there is a revenue deferral and recognition issue for the discrepancy there.  The changes resulted in a $296 million sequential net increase in deferred net revenue as of September 30, 2007, which will be recognized in future periods.  For fiscal March 2008, EA see $0.85 to $1.15 EPS (down $0.05 fromPandemic/BioWare buyout) and see revenues excluding deferrals at $3.8to $4.0 Billion; estimates are $1.15 EPS and $3.77 Billion in revenues.

Pretty impressive title sales are as follows:

• Madden NFL 08 sold 4.5 million copies and was EA’s best performing title in the quarter.
• FIFA 08 sold 2.9 million copies internationally – with sell through at retail up double digits year-over-year.
• MySims, a new owned intellectual property, sold over one million copies on the Nintendo DS™ and Wii.

It also went back over some reorganization charges. The Company expects to incur total pre-tax charges of between $90 million and $110 million, the majority of which will be incurred in fiscal 2008. The Company estimates these actions will result in annual pre-tax cost savings of approximately $25 million to $30 million.

EA is seeing shares up 0.8% in after-hours trading at $59.23, but shares closed down almost 4% at $58.74 in normal trading.  The 52-week trading range is $46.27 to $61.62.

Jon C. Ogg
November 1, 2007