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EA have been forced to issue a profit warning and take nearly $200m dollars off their projected revenue figure for the 4th quarter of the financial year after on-going (catalogue) sales of big-name games failed to live up to expectations. Predicted earnings per share have fallen to somewhere between 8 and 10 cents per share which is significantly less than the originally estimated amounts of 27 and 33 cents per share.
The reason for this drop in fortunes isn’t exactly consistent with the widely held view that EA could release a poo in a DVD case and some sucker-assed “casual gamer” would still hail it as the best thing ever, so what’s gone wrong for the big fella? The main problem EA are faced with is that whilst poor reviews and bad word of mouth don’t initially harm the sales of well hyped, key titles such as GoldenEye: Rogue Agent and The Urbz they do eventually harm their long term sustained sales and it’s in this area that EA seem to have over-estimated things.
EA’s chairman, Larry Probst has admitted that the results are “highly disappointing” saying that whilst new releases such as The Need for Speed Underground 2 are selling well, “they have not been able to offset a significant falloff in catalogue sales”.
However, before you geeks start toasting the downfall of the old enemy or predicting doom and gloom for the industry as a whole, it might be worth noting that industry analysts remain positive about EA’s strength and the strength of the industry as a whole.
“We believe that EA’s shortfall is a company specific issue and does not represent deteriorating industry conditions” commented analyst Michael Pachter. “So far in 2005 US retail software sales are up 6%, with several publishers’ sales up significantly.”
So, Eidos will be fine then.
