May 04, 2005
EA Drops Financial Bomb Number 2
After already pre-announcing disappointing results in the March quarter, Electronic Arts dropped its second bomb by saying it will dramatically miss Wall Street expectations for the June quarter. Wall Street expected $450 million in revenue, but EA has now guided to $300-340 million. Even at that $300 million plus level, EA will now lose money in the quarter. Ouch. To make matters worse, EA took a litigation charge as result of a suit that claimed the company failed to pay overtime to certain employees.
Instead of blaming the hardware cycle and shortage, pricing pressure, and competition, EA just need to get back to its roots and make great games. Frankly in the past year, their reputation for great quality built up over decades has faltered. Paying their best creative talent well, giving them more time to develop games without ungodly hours and annual releases, and holding on to the most gifted employees will be essential to bringing EA back. Using monopolistic financial schemes such as the exclusive contract with the NFL will not.
