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Record revs but lower profits at vidgamer EA

Net income down from $577 mil to $504 mil in 2004

Vidgame giant Electronic Arts reported record revenues for fiscal 2004, but a decline in net income for the year and net revenues for the fourth quarter. Company also said it anticipates a net loss this quarter.

Stock closed up 45¢ to $52.90, but dropped more than 11% in after-hours trading following news.

Redwood City, Calif.-based EA saw net revenues for the year jump 6% to $3.1 billion, driven by some 31 titles that sold more than a million copies apiece.

Net income, though, was down from $577 million in fiscal 2003 to $504 million in 2004.

The year’s final quarter, which ended March 31, saw net revenues decline from $598 million to $553 million year-on-year. Company blamed the drop on lower margins and higher operating costs.

First-quarter revenues are expected to be between $300 million and $340 million, down sharply from last year’s $432 million. As a result, company predicts a net loss per share between 22¢ and 28¢, compared with profit of 8¢ a share last year.

In reporting the results, company toppers noted an industrywide trend toward falling software prices but insisted top titles, such as “Madden NFL Football” and the Sims franchise are likely to hold the line on price.

Chairman and CEO Larry Probst told analysts, “Premium products will continue to command premium prices.”

Probst and chief financial and administrative officer Warren Jenson said the company is investing for long-term growth and expects to see a shift toward mobile gaming and online play.

Online gaming, he said, will mean more deferred income in future reports, but that should not dent the bottom line.

Looking ahead, Jenson said net revenue for 2006 is expected to be between $3.4 billion and $3.5 billion, up 9%-12% year-on-year.

With the absorption of Criterion Software, Jenson said the company will consider further acquisitions over the next year.

“We’re not in any hurry,” Jenson added, “but we believe there will be opportunities, and we expect to be active participants.

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