Shares of video game maker
Electronic Arts
(ERTS)
soared in Wednesday trading after the firm announced plans to cut 1,100 jobs and close 12 of its facilities and promised to overhaul its product roadmap.
Despite a
tough third quarter
marked by
, investors are warming to the firm's latest
restructuring
effort. EA's stock surged $1.98, or 12.8%, to $17.48 in early trading Wednesday, outpacing the broader advance in tech stocks which saw the Nasdaq rise 1.77%.
Confronted with
and
, however, the firm saw its third-quarter losses widen as anticipated holiday season sales failed to materialize. The firm reported a loss of $641 million, or $2 a share, in the quarter, compared to a loss of $33 million, or 10 cents a share, a year ago.
Excluding charges, EA's net income was $179 million, or 56 cents a share, compared with net income of $290 million, or 90 cents a share, a year ago. Revenue rose slightly to $1.74 billion from $1.73 billion a year ago. Analysts were expecting earnings of 88 cents a share on revenue of $1.9 billion.
"While we began cost-cutting aggressively in Q3, we could not get ahead of the revenue shortfall to achieve our target profitability in the quarter," said the company's CEO John Riccitiello, during a conference call late Tuesday.
By cutting 11% of the company's work-force, closing facilities and aggressively managing its expenses, EA hopes to achieve operating expenses of $2.1 billion in its fiscal 2010, which begins in March. This is $500 million less than the firm's previously anticipated run rate.
Riccitiello also outlined EA's new product strategy, explaining that the company needs to rethink its approach to
launching
key titles.
"Consumers have become more cautious, and we need longer lead times on marketing and in some cases more productive investment of our publishing resources," he said. "In short, we need to start earlier and focus more."
The Redwood City, Calif.-based firm is also looking to capitalize on the growing popularity of
Nintendo
's
console.
EA, which recently launched a Wii-based
exercise video
aimed at women, is planning a slew of additional games on the Nintendo console, all supported by a Wii-focused ad campaign.
These include
Tiger Woods PGA Tour
,
EA Sports Active
,
EA Sports Tennis
,
Boom Blox 2
,
Harry Potter
and
MySims Racing
, which will all be unveiled during the first quarter of fiscal 2010, according to Riccitiello.
EA is also focused on delivering content direct to consumers via the Internet after investing $150 million in the technology during fiscal 2009. Although this initiative has so far delivered limited revenue, Riccitiello expects more than $500 million in direct-to-digital sales during fiscal 2010.
The company nonetheless lowered its guidance Tuesday and expects a loss of between $3.29 and $3.56 a share for fiscal 2009. Excluding charges, the company anticipates a loss of approximately 35 cents a share, well below its
of earnings between $1 and $1.40 a share.
Analysts had estimated earnings of 60 cents a share.
EA's stock surge was not mirrored by competitors
Activision Blizzard
(ATVI) - Get Report
and
Take-Two
(TTWO) - Get Report
, which each saw shares inch up about 2% in recent trading Wednesday.
