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EA's earnings report beats forecasts, while Nintendo's disappoints

October 28, 2011|By Alex Pham, Los Angeles Times

For video game businesses reporting earnings, it was a split verdict.

Electronic Arts Inc. reported better-than-expected revenue in its second quarter, driven by the strength of its sports games and a big jump in sales from online and mobile titles such as the Sims Social and Plants vs. Zombies.

The Redwood City, Calif., gaming giant on Thursday also increased its full-year profit guidance by a nickel and projected that revenue from online and mobile titles would exceed $1 billion.

Earlier in the day, Nintendo Co. posted a $925.6-million loss during the first six months of its fiscal year that ended Sept. 30. That's up dramatically from last year, when Nintendo lost $26.5 million during the same period.

Nintendo also projected a $263-million loss for its fiscal year, which will end March 31, reversing a July forecast of a $263-million profit. The Japanese company did not break out second-quarter results from the six-month report.

The two earnings announcements highlighted a major shift within the games business, from one that has traditionally been dominated by shrink-wrapped discs sold in stores to a market that has splintered into an array of new digital channels to reach players.

"There is a spirited debate about whether dedicated game consoles are as relevant today as they were five years ago," said John Taylor, an analyst with Arcadia Investment Corp. "Most people who are interested in playing games casually seem happy to play online or on their mobile phones."

As a result, companies that offer games across all these platforms have a better chance of succeeding than those that specialize in the shrinking console business, analysts said.

EA has been dogged in its pursuit of the former strategy — to spread its franchises to all the places consumers happen to be.

It bought social gaming developer Playfish Inc. in November 2009 in a deal valued at $400 million. And it's gobbled up a string of companies that publish mobile games, including PopCap Games Inc. in July for at least $750 million, Firemint in May and Chillingo a year ago for undisclosed amounts.

The upshot: EA now projects its revenue from mobile, social and other online channels will hit $1.15 billion or more when its fiscal year ends March 31.

For the second quarter that ended Sept. 30, EA posted $715 million in sales, up 13% from $631 million a year earlier. Its net loss was $340 million, or $1.03 a share, up from a $201-million loss, or 61 cents a share, in 2010.

Meanwhile, Nintendo's revenue of $2.8 billion in the first half of its fiscal year was down 41% from $4.8 billion the year before as sales of its once-hot Wii and DS consoles have cooled.

alex.pham@latimes.com

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