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EA to Consolidate Its Online Division

March 05, 2003|Alex Pham | Times Staff Writer

Video game powerhouse Electronic Arts Inc. announced plans Tuesday to fold its EA.com unit into its core publishing business after the online-gaming venture racked up nearly $300 million in losses.

EA had once hoped to spin off the unit, which had nearly 400 employees at its peak. Instead, the company has been forced to scale it back, although it plans to continue its current lineup of online games.

The Redwood City, Calif.-based company said it would take a charge of $55 million to $75 million in the quarter ending March 31, primarily to write down EA.com assets. Between $5 million and $10 million of the charge would reflect the cost of consolidating three game-development shops into a single Los Angeles studio.

EA shares gained 32 cents to $52.42 on Nasdaq.

Launched in 1999, EA.com was supposed to generate advertising revenue from its casual games site, Pogo.com, and subscription revenue from more complex multiplayer games such as "Ultima Online," "Earth & Beyond" and "The Sims Online."

EA.com's most successful online title has been "Ultima," a 5-year-old multiplayer game with 220,000 subscribers who pay $10 a month to play the medieval role-playing game. But low revenue from other titles contributed to quarter after quarter of losses that blemished EA's otherwise solid financial performance.

EA owned 85% of EA.com. AOL Time Warner Inc. recently exchanged its 10% stake in EA.com for 477,000 shares of EA's Class A stock. News Corp., which owned 5% of EA.com, swapped its shares for Class A stock in August.

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