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EA Reports $641 Million Loss, Plans 12 Facility Closures

EA Reports $641 Million Loss, Plans 12 Facility Closures Exclusive

February 3, 2009 | By Leigh Alexander

February 3, 2009 | By Leigh Alexander
More: Console/PC, Exclusive

Electronic Arts reported a third quarter loss of $641 million -- significantly wider than its $33 million loss in the same period last year.

Most of the loss, the publisher says, is attributable to various business charges. EA's revenue actually increased about 10 percent year over year to $1.65 billion, plus $88 million in deferred revenue from online games -- but the gains still did not meet analysts' expectations.

The widening losses are prompting EA to expand its restructuring efforts slightly, however. With the company's results announcement today, EA said it now plans to lay off 11 percent of its workforce, or 1,100 employees, and to close 12 of its facilities. On the company's call to investors, it said these closures would favor "high-cost" locations.

The new restructuring details represent some further specifics beyond what the publisher has yet announced. EA had previously announced a 10 percent reduction, 1,000 employees, and 9 facility closures.

EA also revealed it would reduce its slate of planned SKUs by 30 percent -- excluding its EA Partners titles, the publisher will launch 50 titles, or 125 SKUs, in its fiscal 2010, as opposed to 149 SKUs in fiscal 2009.

Although it still enjoys healthy cash reserves and has not incurred any debt, Electronic Arts has struggled to recuperate its share price since it warned of disappointing sales for its holiday portfolio. Analysts have suggested EA's investors are waiting to see results of the restructuring, which CFO Eric Brown says will reduce the company's operating expenses by about $500 million.

"Our holiday quarter came in below our expectations and we have significantly reduced our financial outlook for fiscal 2009, a clear disappointment," says EA CEO John Riccitiello.

Nonetheless, EA says it's still the leading publisher in North America by market share, according to NPD data pegging its share at 20 percent. The publisher also says its quality scores are up -- in 2008 it had 13 titles rated 80 or above on Metacritic, as opposed to 2007's seven.

EA says its best-selling game was FIFA 09, with 7.8 million copies sold. Need For Speed: Undercover, which the company plans to follow with three new titles, sold 5.2 million copies. And Mythic's Warhammer Online now has 300,000 paying subscribers, as of the quarter's end.

"We delivered on game quality and innovation in calendar 2008, with 13 titles rated 80 or above -- more than any third-party publisher. We expect to build on this great quality record in the year ahead while delivering more profitability."

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