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Games involving spies, wizards and mystical tykes helped boost third-quarter earnings at game-publishing giant

Electronic Arts

(ERTS)

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The Redwood City, Calif., publisher of Harry Potter and James Bond games earned $250 million, or $1.69 a share, up from $132 million, or 92 cents a share, a year earlier. Sales rose 48% to $1.23 billion from $833 million in the same period last year.

The company beat analysts' estimates for net income of $1.57 a share on sales of $1.12 billion, according to Thomson Financial/First Call.

"The quarter was good," said Soundview Technology analyst Shawn Milne. "Relative to the peer group, it was excellent."

Electronic Arts' report may provide investors with a bit of relief, as investors have been selling off stocks in the sector amid concerns over growth projections.

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A recent report from market-tracking company NPD indicated a moderate 10% increase in sales for the game hardware and software sectors to $10.3 billion for 2002.

Electronic Arts is looking to earn 27 cents to 35 cents a share for the fourth quarter, not factoring in studio-restructuring charges. It is forecasting revenue of between $420 million to $460 million. For the fiscal year 2003 ending in March, earnings are expected to be $2.37 to $2.45 a share, on sales of $2.44 billion to $2.48 billion.

Separately, the company is considering raising $2 billion in either debt or equity at a future date, raising speculation on Wall Street that it is positioning itself to make a play for assets of Vivendi Universal Games. Electronic Arts Chief Financial Officer Warren Jenson shot down the rumors and said the move would be purely for "optionality and flexibility" to tap the markets in the future. "It's good housekeeping," he said in an interview. "It does not mean we're going to do anything."

EA ended the year with approximately $1.2 billion in cash and no debt.

The company also announced plans to consolidate several West Coast studios into one, to be based in Los Angeles.

Ahead of the report, shares closed the day up 20 cents, or 0.4%, at $50.97. The stock tumbled $1.25, or 2.5%, to $49.72 in after-hours trading.

EA.com helped drag the stock down. In the third quarter, the dot-com unit lost $19 million, or 13 cents a share.

In recent weeks, the company's shares, which have been scraping their 52-week lows, have crept past the $50 mark. Wall Street analysts have slapped several upgrades on Electronic Arts stock since the beginning of the year, when investors were fleeing the sector over worries of unsustainable growth in 2003. Even Goldman Sachs game-sector bear Chris DeBiase upgraded the company's rating to in line from underweight last week.