Electronic Arts beats expectations with higher-quality games

Video game publisher Electronic Arts reported a strong fourth fiscal quarter today thanks to good sales of its Battlefield: Bad Company and Mass Effect 2 games.

EA said revenue rose 14 percent in the quarter ending March 31, up to $979 million from $860 million a year ago. Earnings were $30 million, or 9 cents a share, compared with a loss of $42 million, or 13 cents a share a year ago. The company said that its Dante’s Inferno and digital online games revenues were also strong.

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EA’s shares fell in after-hours trading, evidently because its outlook wasn’t as optimistic as investors had hoped. Battlefield: Bad Company 2, a modern combat shooting game, sold more than 5 million units, while Dante’s Inferno sold more than a million units. Army of Two: The 40th Day also sold a million units.

EA’s earnings are closely watched because, along with Activision Blizzard, it is one of the largest independent game publishers and its own health is closely tied to the health of the overall game industry. In a conference call, EA said it continues to invest heavily in an unannounced massively multiplayer online game. The company will launch Medal of Honor, a modern combat game, on Oct. 12.

At the E3 conference in June, EA will unveil a bunch of new sports titles, a new Harry Potter game, a Star Wars online game called The Old Republic from BioWare, Hasbro titles, a new Need for Speed game, DeadSpace 2, Crysis 2, Bulletstorm, a few Sims 3 titles, and other games. EA will also show games based on the upcoming motion-sensing control systems from Sony and Microsoft.

Non-GAAP revenues were $850 million, up $241 million from a year ago, and earnings were $23 million, compared to a loss of $120 million a year ago. Non-GAAP earnings per share were 9 cents a share, compared to a loss of 37 cents a share a year ago. Analysts had expected a profit of 5 cents a share on revenue of $835.4 million. The non-GAAP figures are adjusted to exclude special items and account for deferred revenue on online games.

In the current first fiscal quarter, Redwood City, Calif.-based EA said it expects a non-GAAP loss of  35 cents a share to a profit of 40 cents a share on revenue of $460 million to $500 million. Wall Street was expecting a loss of 33 cents a share on revenue of $516.8 million. EA maintained its fiscal 2011 year guidance.

For the full 2010 fiscal year, EA reported GAAP revenue of $3.654 billion, compared with $4.212 billion for the prior year. Non-GAAP net revenue was $4.159 billion, up 2 percent compared with $4.086 billion for the prior year. GAAP net loss was $677 million, compared with $1.088 billion a year earlier. Loss per share was $2.08, compared with a loss of $3.40 a share a year ago. Non-GAAP net income was $145 million, compared with a loss of $96 million a year ago. Non-GAAP earnings per share were 44 cents, compared with a loss of 30 cents a year earlier.

During the year, EA had 20 titles with an average Metacritic rating of 80 or above. Metacritic aggregates reviews on other sites and scores them on a scale of zero to 100.

“We are rebuilding EA’s reputation for quality with consumers and believe that will translate into benefits for investors,” said John Riccitiello, chief executive at EA.

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Five EA titles sold more than 4 million units in the fiscal year: FIFA 10, Madden NFL 10, The Sims 3, Battlefield: Bad Company 2, and Need for Speed Shift. Overall online game revenue — which EA calls its digital business — was $570 million, up 33 percent. EA Mobile, which makes mobile games such as iPhone titles, generated revenue of $212 million in the fiscal year, up 12 percent from a year ago. EA said it has sold over 8 million units of its Hasbro-branded family and kids games, while the Sims franchise has sold more than 125 million units.

EA said that its Playfish division saw success with its launch of Hotel City, a Facebook game that has grown to 13 million users and is now one of the top 15 games. Playfish also has two existing top 10 games on Facebook: Pet Society and Restaurant City. EA will launch FIFA Superstars, a soccer game on Facebook, soon. That is the first branded EA game to be launched by Playfish since EA acquired it for as much as $400 million last year. EA continues to invest heavily in online games and downloadable content that extends a game experience after purchase.

John Schappert, chief operating officer at EA, said that in general, Facebook games dropped 4 percent during the fourth fiscal quarter for all game companies. But he noted the Playfish Hotel City game bucked that trend.

On the mobile front, EA generated $55 million in revenue in the fourth fiscal quarter, up 15 percent from a year ago. EA launched 5 iPad games on launch day on April 30, and it said it had two of the top three paid iPad apps. EA is the No. 1 game publisher on the iPhone in the U.S.  In the last fiscal year, EA Mobile launched 37 iPhone games and 50 mobile games.

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