EA is expected to report a net loss for the quarter, which is typical
considering video game publishers have traditionally made most of their
money during the holiday season when people buy the games as gifts.
This, however, is slowly starting to shift as games are becoming a
mainstream form of entertainment people enjoy year-round.
Despite the choppy economy, the video game industry has
remained strong this year, with retail sales tracking at historic highs.
Part of this can be attributed to the genre's widening audience, as well
as the fact that it's a relatively cheap form of entertainment, compared
with travel, for example.
After posting its fourth-quarter results in May, EA said that
going forward, it will only provide guidance for the full year, updated
each quarter. Analysts, such as Wedbush Morgan's Michael Pachter, think
that withholding quarterly guidance will create volatility in EA's share
price.
Nonetheless, he noted that company's retail sales in the U.S.
are up 86 percent from the same period a year earlier, based on data
from market researcher NPD Group. Much of this strength is coming from
"Rock Band," the popular music simulation game published by MTV Games
and distributed by Electronic Arts.
EA has enjoyed its status as the world's largest video game
publisher, but it now has a worthy rival in Activision Blizzard Inc.
French media and telecommunications conglomerate Vivendi SA has bought a
majority stake in Activision Inc. and combined it with its games unit.
Activision Blizzard owns "World of Warcraft," the world's most popular
online game, as well as the "Guitar Hero" franchise.
EA is still trying to buy smaller rival Take-Two Interactive
Software Inc., the publisher of the popular "Grand Theft Auto" series,
for $2 billion. Take-Two has repeatedly rejected the offer as too low,
and earlier this month EA extended a tender offer for the company for
the fifth time.
BY THE NUMBERS: Analysts, on average, are expecting a loss of
33 cents per share on sales of $633.9 million, according to a poll by
Thomson Financial.
ANALYST TAKE: Pachter, who rates EA "Strong Buy," expects the
company's shares to decline "when it falls short of consensus this
quarter, and to appreciate when it 'beats' consensus next quarter."
He expects EA to post a pro forma loss of 44 cents per share,
but added that EA should still maintain its guidance for the full year.
Mike Hickey of Janco Partners expects an "extremely weak
fiscal Q109 earnings as their 1H sales should be heavily weighted toward
low-margin products like 'Rock Band.'"
WHAT'S AHEAD: "Spore," from "Sims" creator Will Wright, is one
of the highest-anticipated games coming out in the fall. Other notable
games include "Mirror's Edge," a first-person adventure game, and "Dead
Space," about an engineer who stumbles across an alien infestation in
space -- and fights them using "strategic dismemberment."
-xinhu