Electronic Arts Fizzles Out

Although this transition period has proved to be much more difficult than expected, investors have largely stuck by the sector's stocks, banking on better times ahead.

But investors appear to have lost confidence following EA's report. In early Thursday trading, EA's stock was off $5.61, or 10.3%, to $48.89. Shares of EA rivals Activision (ATVI Quote) and Take-Two Interactive (TTWO Quote) also were lower.

In the just-completed period, EA lost $16 million, or 5 cents a share, on sales of $641 million. In the same period a year earlier, EA earned $8 million, or 2 cents a share, on $553 million in sales.

Excluding restructuring, acquisition and foreign-earnings repatriation costs, EA would have earned $43 million, or 14 cents a share.

That result topped analysts' estimates. On average, Wall Street was expecting the company to earn 9 cents a share on $581 million in sales, according to a survey of analysts by Thomson First Call.

In February, EA forecast a loss of 15 cents to 23 cents a share -- or, excluding expenses, a profit of 6 cents to 14 cents a share on sales ranging from $550 million to $600 million.

But for the seventh quarter in a row, EA offered a dour outlook for the future.

In the current quarter, for instance, the company expects to lose 36 cents to 42 cents a share -- 22 cents to 28 cents a share excluding certain charges -- on sales ranging from $300 million to $340 million.

In contrast, analysts had previously predicted that EA would lose 19 cents a share in the current quarter on a pro forma basis on $411.9 million in sales.

In the same period last year, the company lost $58 million, or 19 cents a share, on $365 million in sales.