Turns out the videogame biz may not be totally recession proof.
Electronic Arts on Thursday cut its profit forecast for the year and announced it will lay off 6% of its workforce, sending shares plunging 14% in after-hours trading.
Bad news came despite a boffo 28% boost in net revenue to $894 million for the quarter ended Sept. 30. Major drivers included “Madden NFL ’09,” which sold 4.5 million units, on par with the ’08 edition; the new PC game “Spore” from “Sims” creator Will Wright, which sold 2 million units; and “Warhammer Online,” which has sold 1.2 million copies and has 800,000 active players, many of whom pay a monthly subscription fee.
However costs rose substantially and CEO John Riccitiello noted that EA saw a slowdown at retail in October. Company also has been hurt by the strengthening dollar and the decision to delay its game tied to “Harry Potter and the Half-Blood Prince,” since Warner pushed back the movie from November to July.
Chief financial officer Eric Brown described EA as “cautiously optimistic” about November and December, which traditionally represent the majority of revenue for videogame publishers.
“We have heard that retailer foot traffic is down in general, which is a negative,” he said in an interview. “But we also know that retailers are increasing their shelf space (for video games ahead of the holidays).”
Layoffs will affect between 500 and 600 workers and should save the company about $50 million.
For the fiscal year ending March 31 next year, EA reduced its expected earnings per share range to between a 21-cent loss and 7-cent profit. It had previously expected a profit of 21 to 48 cents per share.
It keeps revenue guidance constant at between $4.9 billion and $5.15 billion.
Before earnings were announced, EA stock closed down 1% at $27.73.
(The Associated Press contributed to this report.)