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Electronic Arts' Profit, Sales Up

October 23, 2003|Alex Pham | Times Staff Writer

Driven by strong sales of its "Madden NFL" franchise, video game publisher Electronic Arts Inc. on Wednesday reported higher profit and sales in its fiscal second quarter.

EA, based in Redwood City, Calif., posted sales of $530 million in the quarter ended Sept. 30, up 17% from the same period a year ago. Net income surged 52% to $77 million, or 50 cents a share, from $50 million, or 35 cents, a year earlier.

The stock price of the world's biggest game publisher, however, fell on investor concern over whether it could continue to serve up record results.

Shares fell $2.70 to $101.94 on Nasdaq before the earnings were reported, then dropped as low as $97.17 in late trading after the announcement.

"They are a growth engine in decline," said Wedbush Morgan Securities analyst Michael Pachter, who recently lowered his rating on EA to "hold" from "buy."

EA, which got 42% of its sales last quarter from games played on Sony Corp.'s PlayStation 2 console, lowered its projections for PS2 game sales, saying an expected $30 price drop for the $179 device was now unlikely this year. As a result, EA said PS2 game sales would grow 15% to 20% this year, down from its earlier estimate of 25% to 30%.

"Investors clearly will be concerned by EA's downward revision," said RBC Capital Markets analyst Stewart Halpern.

Industry analysts now expect a PS2 price cut next year.

"The delay in hardware price reduction has only one effect on EA," Warren Jenson, EA's chief financial officer, told analysts. "It makes next year that much bigger for EA."

The firm, which markets "The Sims" and "Command & Conquer" games, also announced a 2-for-1 stock split on or near Nov. 17 for shareholders of record on Nov. 3.

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