EA Slashes Profits, Cuts Workforce

Electronic Arts announced financial results for their fiscal third quarter ended December 31, 2005 on Thursday. Net revenue was $1.270 billion, down 11 percent as compared with $1.428 billion for the fiscal quarter ended December 31, 2004. Net income for the quarter was $259 million as compared with $375 million for the prior year. Larry Probst, Chairman and CEO, downplayed the negative growth. “We ended 2005 in a very strong competitive position,” said Probst. “We were number one on the PlayStation 2, the Xbox, PSP and PC in both North America and Europe. We also had a successful launch on the Xbox 360 and expect that we will be the number one publisher on this platform in 2006.”

Sales were driven by Need for Speed Most Wanted, FIFA 06, Harry Potter and the Goblet of Fire, The Sims 2 and Madden NFL 06, each selling over two million copies in the quarter. NBA Live 06, SSX On Tour, Tiger PGA Tour 06, From Russia with Love and Battlefield 2: Modern Combat also had strong sales, each selling over one million copies in the quarter. Most notable was the seven million copies of Need for Speed Most Wanted sold. EA launched five Xbox 360 titles in the quarter resulting in 30 percent revenue share in North America and 24 percent in Europe. EA had 22 percent revenue share in North America and 23 percent revenue share in Europe.

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“Calendar 2006 will be a year of investment ahead of revenues,” said Warren Jenson, Chief Financial and Administrative Officer. “Our resources will be focused on next-generation software and the global expansion of our online and mobile businesses.” Despite the spin, Electronic Arts is slashing jobs. The Wall Street Journal put the layoffs at around 200, but an EA spokesman claims that some were reorganized to other positions in the company. The impact of weak holiday sales on current-generation consoles is partially to blame.

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