Electronic Arts Focuses on Digital Strategy as Earnings Beat Expectations for Fourth Straight Quarter

Electronic Arts’ shares are up in after-hours trading, after beating analysts’ expectations. Now the company is turning its attention to its growing digital business.

The videogame maker posted a GAAP loss of $322 million, or 97 cents a share, on revenues of $1.1 billion. However, when stock-based compensation and revenue deferrals are excluded, the company recorded a 59-cent profit, jumping 33 cents from the year earlier.

Those modified numbers beat expectations of analyst who forecast the company’s earnings to surge 76 percent to 58 cents a share from the year-ago period, according to Thomson Reuters.

It is now the fourth quarter in a row that EA has beat consensus.

Meanwhile, the company continues to try to call attention to its digital results as it transitions its business model–from one where gamers pay $60 for an Xbox title to one where consumers pay a few bucks for an iPhone game or play Facebook games that may be free and monetized through other mechanisms, such as virtual goods.

But it’s hard to convince anyone of the prospects when its packaged-goods business generated $1.1 billion in revenues and its digital games generated a paltry $211 million.

Still, its digital business is up, jumping 39 percent compared with the same period a year earlier. “We are on track to hit three-quarters of a billion in revenues this year as planned, and we were No. 1 on key platforms like iPhone and iPad,” said CFO Eric Brown in an interview.

Digital revenues mainly consist of mobile games, digital downloads and social games built by its Playfish subsidiary.

Mobile revenues totaled $59 million in the third quarter, up from $56 million last year. EA does not break out revenues of its Playfish subsidiary, but said it had 39 million monthly active unique visitors (MAUs) in social games, falling from 58 million in the year-ago period.

Brown explained that its monthly uniques are down, much like those of others in the industry that were hurt when Facebook changed its policies about a year ago on how much games could be promoted on the social network.

“That business is performing well. We are No. 2 in the social games space. MAUs are down for the entire segment, although we are monetizing better, and our strategy is to bring more EA-branded properties to the social network space,” he said.

Yesterday, Monopoly launched on Facebook, joining FIFA soccer and Madden.

The company also announced that it will repurchase up to $600 million in stock over the next 18 month, which demonstrates the company’s confidence in its digital strategy, said EA’s Chief Executive Officer John Riccitiello in the release.

Brown: “We have excess cash and there’s characteristics evolving for our digital strategy, as we build our digital revenue, and it becomes more profitable and predictable.”

Does that mean we won’t see any more big acquisitions–like the $400 million Playfish purchase– by the game maker?

“We still would have the opportunity to do small acquisitions. For instance, we recently purchased Chillingo, so we still have capital to do small scale, but we don’t intend to do large acquisitions in the short term.”


Latest Video

View all videos »

Search »

I’m a giant vat of creative juices.

— David Pogue on why he’s joining Yahoo