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Lowered Price Points One
Reason For Profit Decline
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Electronic Arts reported Q4 net income was $8M, down 91% from $90M in the year-ago
period, “due to a lack of blockbuster hits compared with a year earlier,” according
to Dean Takahashi of the SAN JOSE MERCURY NEWS. Revenue in the quarter was $553M,
down 7.5% from $598M a year earlier. Videogame console makers are expected to
launch new systems sometime next year, and EA CFO Warren Jenson said, “With the
new consoles coming, it’s an exciting time for the industry. But in the short
term, that means this is a period of investment.” Takahashi notes while the “costs
of developing games for the new generation of consoles is rising, EA has to bear
the brunt of those costs upfront.” At the same time, consumers “are likely to
spend less as they wait for the new consoles to arrive” (
SAN JOSE MERCURY NEWS,
5/4). Harris Nesbitt Gerard analyst Edward Williams: “They’re in an investment
phase where they have significant ramping costs for the new hardware systems that
aren’t offset by any revenue until those systems are actually on the market.”
More Jensen: “You’re going to see more and more titles coming out at the $39 price
point as opposed to the $49 price point. Overall price points will go down” (
L.A.
TIMES, 5/4). Earnings were announced after the close of trading yesterday.
As of presstime, shares were trading at $49.10, down 7.18% from yesterday’s close
(
THE DAILY).
