Economy takes its toll on EA

Profits 'significantly below' expected figures

The worsening economy has claimed another big media victim, as Electronic Arts on Tuesday announced it will significantly miss its guidance for the current fiscal year.

The nation’s top videogame publisher said the poor performance was due to a number of factors, including retailers cutting back on inventory, a greater concentration of consumer spending on the top 10 titles, and lower than expected sales for several key holiday titles.

Execs didn’t specify performance of specific games in a conference call, but CEO John Riccitiello did indicate that new action game “Mirror’s Edge” has sold particularly poorly, a contention that sources close to the company confirmed. In addition, sales for “Rock Band 2,” which EA distributes for MTV, are believed to be weaker than expected, just as competitor “Guitar Hero: World Tour” has been for Activision.

“The majority of our portfolio is underperforming our sell-through projections,” stated chief financial officer Eric Brown, who cited soccer game “Fifa” as the only notable exception. “This fact, combined with the observation that some retailers are planning to end the calendar year with fewer weeks of inventory on hand, indicates that we will not have sufficient reorder activity in December to meet our (current quarter) expectations.”

Riccitiello said the recent underperformance only reinforces the need for the 6% layoffs announced in October, as well as a reduction in titles. With consumer dollars increasingly concentrating on top selling titles, the CEO said the company will focus even more aggressively on games with the biggest profit potential. EA Sports games are expected to escape the planned cuts.

Publisher also plans to focus on games with more online components in order to improve sales in its catalog, which have been performing poorly.

Though several videogame publishers have said they are being hurt by the recession, others appear to be strong. Nintendo, in particular, has continued to see boffo sales for its Wii and DS consoles, along with numerous games.

EA had previously said it would make a profit of at least $1 per share on over $5 billion in revenue for the fiscal year ending March 31. Without citing a new specific range, Brown said the company would come in “significantly below” both figures.

Shares in Electronic Arts plunged 10% on the news in after-hours trading, following an 11% drop to $19.35 during the day.

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