In a recession, people are supposed to be able to buy soap, hamburgers, beer, and video games. This downturn may be worse than most. Electronic Arts (ERTS), posted a net loss of $310 million and said it would lay-off 6% of its workers.
It is stunning to imagine that the maker of iconic games like "Madden NFL" and "Spore" could be doing poorly, but consumer spending may be worse than even the federal government numbers show.
Now that earnings season is fairly far along, what people will buy and what they will part with is becoming more clear. Oil companies did well. Consumers are still buying gas. So are airlines. Someone is using a lot of oil.
Procter & Gamble (PG) did well. The toothpaste and deodorant franchises are safe. AT&T (T) earnings exceeded expectations. The cell phone business is still booming. Ford (F) and GM (GM) are expected to do poorly. That speaks for itself.
The EA results may give a tiny hint about where the economy is going, at least in the short term. Consumers will buy the necessities. Once it gets beyond items people need for their daily lives, they are cutting back. Even if playing football on a TV for six hours a day is fun.
Douglas A. McIntyre
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