Electronics Arts Beats

Updated from July 22

Shares of Electronic Arts ( ERTS) were down nearly 8% Friday after the company issued somewhat disappointing guidance and an analyst warned of market share losses.

In a note issued on Friday, Wedbush Morgan analyst Michael Pachter observed that the company declined to raise the top end of its full-year guidance. The company also expects to post little to no revenue growth in the holiday quarter, he noted.

A number of potential blockbuster titles will be competing for market share in the fourth quarter, including games such as Take Two's ( TTWO) Grand Theft Auto: San Andreas, Microsoft's ( MSFT) Halo 2 and Doom3 from Activision ( ATVI).

"We believe that the company expects to feel the effects of competition from those and other blockbusters this holiday season and is preparing its investors for a potential loss of market share during this key period," Pachter said in his note.

Pachter, who covers the video game sector, does not own shares of any of the companies he covers, and Wedbush Morgan does not have investment banking business with EA.

In an interview with TheStreet.com, company CFO Warren Jenson said EA wasn't worried about the upcoming holiday quarter, adding that the company feels that many of its titles, such as its upcoming Burnout 3 and The Lord of the Rings: The Battle for Middle-earth, will be hits in their own right.

Still, in recent trading, shares of the video game software leader were at $48.65, off $4, or 7.6%.

The sell-off came despite the company's earnings report, which topped consensus estimates.

The video game software company earned $24.23 million, or 8 cents a share, in the quarter. In the same period a year ago, EA earned $18.37 million, or 6 cents a share.

Revenue at the company jumped 22% from the same period a year ago to $431.64 million.

Analysts were looking for earnings of 5 cents a share in the quarter on $420.86 million in sales. In April, EA predicted that its bottom line would range from break even to 5 cents a share in profits on sales of between $390 million to $430 million.

EA provided an earnings outlook that was roughly in line with estimates and guided revenue higher. The company now expects to earn 28 cents to 34 cents a share in its fiscal second quarter on sales ranging from $680 million to $715 million. For the full year, EA projected earnings of between $2 to $2.10 a share on sales ranging from $3.3 to $3.4 billion.

In EA's second quarter, Wall Street has projected earnings of 31 cents a share -- 32 cents a share excluding charges -- on sales of $629.04 million. For the full year, analysts are looking for profits of $2.05 a share -- on both a GAAP and pro-forma basis -- on sales of $3.34 billion.

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