Electronic Arts Down Big in After-Hours Following Q3 Report

Cash from operations improved slightly in the third quarter. Over the nine-month period, however, money was required to fund the business. Still, the trend is in the right direction: the cash used for operations was 50% less than the cash used during last year's nine-month period.

Management, however, is expecting better times ahead. It points to titles such as Mass Effect 2 and Dante's Inferno as saving graces. Indeed, these should be exciting games.

In terms of guidance, EA proposed a range of between 50 cents per share and 70 cents per share for fiscal 2011 profit. Unfortunately, according to Reuters, the guidance is not what Wall Street wanted to hear.

Furthermore, if you ask me, even if EA goes above the top end of its predicted range, the stock isn't cheap enough yet to imply a margin of safety.

If you want to make a contrarian move with the stock, I would definitely suggest that you try to be patient for a lower share price. EA simply has too many problems at the moment. On the other side of the coin, the publisher isn't going to disappear, and maybe it's getting close to having all the bad news priced in, like some have been saying.

But the video game sector is trying to make a comeback, and while many think 2010 will be a relatively more compelling time for companies such as Activision Blizzard (ATVI), Nintendo Co., Ltd. (NTDOY), Microsoft Corporation (MSFT), and Sony Corporation (SNE), I'm still waiting for more data.

Disclosure: I don't own any company mentioned; positions can change without notice.