Electronic Arts beats expectations, but is it the best publisher out there?

Posted May 14th 2008 9:10AM by Steven Mallas
Filed under: Earnings Reports, Microsoft (MSFT), Sony Corp ADR (SNE), Electronic Arts (ERTS), Activision Inc (ATVI)

Electronic Arts (NASDAQ: ERTS) issued Q4 and full-year numbers on Tuesday. The competitor of Activision (NASDAQ: ATVI), THQ (NASDAQ: THQI) and Take-Two Interactive (NASDAQ: TTWO) reported adjusted fourth-quarter revenues of $919 million, which was good for a 50% increase. Earnings per diluted share were $0.09 on an adjusted basis, also representing a 50% jump. For the full year, adjusted revenues jumped 30% to $4 billion and earnings per diluted share rose 36% to $1.06. Not too bad.

EA, according to Briefing.com, also beat Wall Street's expectations by quite a bit. EA was forecast to only break-even on a non-GAAP basis, so the difference was a nice $0.09. In terms of operational cash flow, EA increased the metric by 33% during the fourth quarter, but for the full year, operational cash flow decreased 15%. Ah, such is life, I guess. Nevertheless, EA produced 27 titles that sold over a million units this year -- three more than in the previous year. Fifteen of its titles sold over 2 million units -- five more than the last fiscal period. Titles such as Army of Two and Rock Band, as well as various sports franchises, drove the results.

Things sound pretty good, don't they? EA is definitely a major force on the Sony (NYSE: SNE) PlayStation, Microsoft (NASDAQ: MSFT) Xbox 360 and Nintendo (OTC: NTDOY) Wii platforms. But EA has had some challenges during this console cycle, and there is the perception that it needs a major merger to combat the threat posed by the Activision and Vivendi Games transaction. And let's not forget that Activision is on fire all on its own. That's what the whole attempted takeover of Take-Two is all about.

Personally, I'm playing Activision right now, having held it for a long time. My cost basis is around $13 per share, and the stock is hovering around $32 per share as of this writing, only a few cents away from a 52-week high. EA, as of this writing, is about $54 per share, a little ways off from its 52-week high of $61.62. I'm happy holding onto my Activision shares, but for those who are interested in getting in on a game-publisher, EA is probably worth some due diligence since its stock isn't at the top-end of the yearly range. EA has a great software portfolio full of franchises, and these earnings results indicate that it can still play one heck of a game.

Disclosure: I own shares in Activision; positions can change at any time.

Tags: Activision, Army of Two, ArmyOfTwo, ATVI, Electronic Arts, ElectronicArts, ERTS, inthenews, Microsoft, MSFT, nintendowii, playstation3, Rock Band, RockBand, SNE, THQI, vivendi games, VivendiGames, Wii, xbox 360, Xbox360

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Reader Comments (Page 1 of 1)

5-14-2008 @ 2:47PM

Kenneth said...

I think EA sports is the driving force behind the company. It's a highly addictive genre because the teams change every year and the consumer is forced to get the next game just to feel like they're not being left out.
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