Game publisher EA's holiday-quarter sales forecast misses estimates

Industries Reuters

(REUTERS/Brendan McDermid/File Photo)

Electronic Arts' revenue forecast for the holiday quarter narrowly missed estimates on Tuesday as the game developer gears to face tough competition from rivals such as Activision.

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Shares of the videogame publisher that closed up nearly 2 percent were down 3.4 percent at $115.60 in after-market trading.

The company forecast third-quarter adjusted revenue of $2 billion, a tad lower than the analysts' average estimate of $2.01 billion, according to Thomson Reuters I/B/E/S.

"We always try to be conservative... Christmas is always the toughest time to predict how business is going to be," Chief Financial Officer Blake Jorgensen told Reuters.

EA's holiday quarter launches include "Star Wars Battlefront II" on Nov. 17 and "Need for Speed Payback" on Nov. 10.

The company expects "Star Wars Battlefront II" to replicate the success of the previous version that sold over 14 million units in the fiscal year 2016.

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"They had two big games last year in Q3 - "Titanfall" and "Battlefield" and have "Star Wars Battlefront" and "Need for Speed" in this year's Q3 that should result in roughly flat year-over-year performance, but they are being exceedingly conservative," Wedbush Securities analyst Michael Pachter said.

Bigger rival Activision Blizzard's slate for the holiday season includes "Call of Duty: WWII."

Its personal computer version of the smash hit "Destiny 2", which was launched on Oct. 24, will also drive competition in the December quarter.

On Tuesday, EA raised its full-year adjusted revenue forecast to $5.15 billion from previously stated $5.10 billion.

"The analysts from the very start of the year have not really adjusted their numbers correctly... they tend to get ahead of themselves," Jorgensen said.

"Our fourth quarter is larger than they (analysts) believe and the third quarter may be slightly under where they are."

Sales at EA's high-margin digital business rose 21.7 percent to $689 million in the second quarter ending Sept. 30 as more gamers bought their titles online instead of purchasing physical copies from retail stores.

The game company's net loss narrowed to $22 million, or 7 cents per share, from $38 million, or 13 cents per share, a year earlier.

EA's revenue rose nearly 7 percent to $959 million in the quarter, driven by higher sales of its latest editions of popular sports titles such as "Madden NFL" and "FIFA".

On an adjusted basis, the company reported a revenue of $1.18 billion.

Videogame companies are required to defer some revenue from certain online-enabled games following a tweak to the U.S. accounting rules.

 

(Reporting by Aishwarya Venugopal in Bengaluru; Editing by Arun Koyyur)