EA Exceeds by a Dime

Similarly, the company reported a jump in operating expenses. General and administrative costs rose 24% to $52 million, while research and development costs spiked 16% to $182 million. As a percentage of sales, R&D costs rose to about 27% from 22% last year.

The rise in development costs is related to gearing up for the next-generation consoles that will start rolling out this month with the debut of Microsoft's 360, Jenson said. The company is investing in development tools and technology for the new platforms and in crafting next-generation titles, he said.

Additionally, the company's development staff has swelled more than 30% to 4,700 people he noted.

EA generally expenses its development costs as it incurs them. In contrast, most of the company's competitors account for those costs as capital expenses, amortizing them a little bit at a time over the expected life cycle of particular games.

EA's accounting method tends to weigh down earnings in transition years, such as this one, but helps boost earnings later in the cycle, Jenson said.

Despite posting a profit in the quarter, EA saw a net outflow of cash in the period. Its free cash flow -- which represents cash generated from operations minus capital expenditures -- was $11 million in the red.

Meanwhile, the company spent $372 million in the quarter repurchasing stock as part of a $750 million overall repurchase plan.

The company ended the quarter with $2.23 billion in cash and short-term investments compared with $2.57 billion at the end of the fiscal first quarter in June.

EA's shares closed regular trading off $1.09, or 2%, to $55.79.

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