As Electronic Arts ( ERTS) goes, so goes the video-game industry, according to conventional wisdom.

So with the software company scheduled to release its fiscal fourth-quarter results after the bell Thursday, investors, competitors and analysts will be scrutinizing its report and comments for leads on the broader video-game market. But eyeing potential challenges in 2005 and 2006, the company may give guidance that neither accurately reflects the industry's outlook nor proves pleasing to traders seeking a near-term catalyst.

As with many of its peers, Electronic Arts' shares have outperformed major averages year to date, up 6.6% after dipping 39 cents to $50.81 on Wednesday. But questions about the direction of the video-game market have arisen following recent reports from Sony ( SNE) and research firm NPD Group.

Earlier this week, Sony said it expects to ship 14.1 million units of its PlayStation 2 console this fiscal year, compared to 20.1 million in its just completed fiscal year. Meanwhile, NPD said that the dollar value of sales of video-game consoles and software in the first quarter fell by 1% vs. a year ago to $1.8 billion.

"If they Electronic Arts are able to paint a rosier picture than Sony, you're going to see some price appreciation in the stock," said Joe Spiegel, a fund manager at Dalek Capital Management, which has no position in Electronic Arts. "If they're more downbeat, the entire space will take a beating. If they are kind of 'middle of the road,' it will be wait-and-see for E3."

E3 -- the Electronic Entertainment Exposition -- is the video-game industry's big convention, where industry players typically make major announcements or debut new products. The exposition opens May 11.

But looking to Electronic Arts for broader guidance may be problematic going forward, said Michael Pachter, who covers the company for Wedbush Morgan Securities.

"People hang onto their every word like these guys are gods," Pachter said. But while investors and analysts defer to Electronic Arts' console sales projections, those projections are "consistently lame," he said.

Managing Growth

The company's own earnings guidance may not give a true picture of how the industry is going, the analyst suggested. Instead of squeezing every last cent of profit out of the company this year, Electronic Arts' executives are trying to carefully manage its earnings growth over the next several years.

Rumors are circulating that Microsoft ( MSFT) or Sony will debut their next-generation consoles in 2006, Pachter said. Such launches tend to depress sales of games for older consoles while driving up development costs. Those factors could make it tough for Electronic Arts -- and other game companies -- to post earnings and sales growth in 2006, he said.

Anticipating such an outcome, the company may well guide to slower growth in its coming fiscal year than it could potentially record, so that it can show earnings growth in 2006 as well, the analyst speculated. By delaying some of its product releases or by getting a jumpstart on development for the new consoles, the company could effectively manage such growth, Pachter said, calling CFO Warren Jenson a "visionary regarding where the company needs to be in two to three years."

A representative for Electronic Arts did not return calls seeking comment.

Still, the company has already sought to reign in investor expectations. In January, the company's stock tumbled after Electronic Arts projected fourth-quarter earnings and revenue that were significantly below analysts' estimates.

Analysts have since revised their forecasts, but their estimates still top Electronic Arts own guidance. Analysts surveyed by Thomson First Call expect the company to post earnings of 21 cents a share in the quarter on $571.59 million in sales. The company guided in January to earnings of 17 cents to 20 cents a share on sales ranging from $550 million to $570 million.

Meanwhile, analysts expect the company will post strong revenue and earnings growth in its coming fiscal year. The current consensus estimate calls for the company to earn $2.01 a share on $3.28 billion in sales next year, according to Thomson First Call. That projection implies earnings-per-share growth of about 10.9% on a revenue upsurge of 12.2%.

However, estimates for the year range from $1.88 to $2.13, reflecting uncertainty about how optimistic Electronic Arts is willing to be.