Electronic Arts Warns

Notably, the installed base of users for Microsoft's (MSFT Quote) new Xbox 360 console is likely to be lower than EA had expected it to be by the end of the holiday quarter, Probst said. So, too, is the user base in North America and Europe for Sony's (SNE Quote) PlayStation Portable handheld system, he said.

Meanwhile, Sony is likely to sell fewer PlayStation 2's this holiday season than expected, Probst said, adding that sales of that older console would have been helped by a price cut.

Additionally, the software lineup is notably weaker this holiday season than last, Probst said. The industry doesn't have anything to match hits such as Microsoft's Halo 2, Take-Two Interactive's (TTWO Quote) Grand Theft Auto: San Andreas from last year, he said.

Taken together, those issues could lead to a double-digit sales decline for the industry this holiday quarter, Jenson said. For the year, the company now expects video-game software sales to fall between 5% to 10% in North America. Previously, the company had predicted that sales would range from flat to up 5%.

"We're still very bullish about upside potential of next-generation platforms," Probst said. "A combination of things occurred this quarter that caused it to be below expectations."

Tuesday's announcement shouldn't have come as much of a surprise to investors. EA officials have been cautioning investors since early November that holiday results could be weak. Indeed, the company's previous holiday quarter guidance was already well below analysts estimates at the time; at that point, Wall Street was calling for $1.42 a share in earnings in the quarter.

EA has kept up the mantra since then. Less than two weeks ago, for instance, Jenson said that although sales in North America had picked up around Thanksgiving, they were weak before and after then in both that continent and in Europe, the company's two biggest markets.