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Electronic Arts Delivers on Next Gen Consoles

Posted on Monday, May 12th 2014

According to Gartner, the global video game industry is estimated to be worth $93 billion in 2013, growing from $79 billion in 2012. Gartner believes that the industry, which includes video game console hardware and software, online, mobile, and PC games, will grow to $111 billion by 2015. Growth is expected to be driven by the mobile games industry, which is projected to grow to $22 billion by 2015 from $13 billion in 2013. During the same period, video game console revenues are expected to grow to $55 billion from $44 billion in 2013 and PC games are projected to grow to $21.6 billion from $17.7 billion in 2013. Only the handheld game sales will fall to $12.4 billion in 2015 from $18 billion last year.

Electronic Arts’ Financials
Driven by strong sentiment, game publisher, Electronic Arts (Nasdaq: EA) also delivered robust performance for the recently ended year. Fourth quarter revenues fell 12% over the year to $914 million, but surpassed the Street’s projections of $812.4 million. EPS of $0.48 fell from previous year’s $0.55 but was also significantly ahead of the market’s targeted earnings of $0.12 per share.

By segment, digital revenues fell 11% over the year to $550 million and published and packaged revenues fell 12% over the year to $350 million. Distribution revenues fell 46% to $14 million.

EA ended the year with revenues of $4.02 billion, up 6% over the year while earnings doubled to $1.69 per share.

EA’s mobile efforts are delivering strong results and the company recorded mobile revenues of $460 million for the year with over 130 monthly active users. During the last quarter, EA saw 143 million mobile downloads for their games.

For the current quarter, EA projected revenues of $700 million compared with the Street’s projections of $632.68 million. EA expects to end the quarter with a loss of $0.05 per share, significantly narrower than the consensus of a loss of $0.23 per share. They expect to end the year with revenues of $4.1 billion and EPS of $1.85. The market was looking for revenues of $4.11 billion with EPS of $1.52.

EA’s Growth Line-up
EA’s performance is attributed to their current and projected gaming releases. During the recent quarter, EA released the much awaited game Titanfall for XBox consoles. For the current year to date, EA’s games hold three of the top five leading titles across all platforms globally. The games that are leading the ranking are FIFA 14, Titanfall, and Battlefield 4. Within North America and Europe, EA is the leading publisher on the new consoles with 40% market share.

They have a bigger lineup scheduled for the coming months with new editions of EA SPORTS franchises including Madden NFL 15, FIFA 15, and NHL 15. NHL 15 will also be the first time that the NHL game series will be available on PlayStation 4 and Xbox One. EA will also debut the EA SPORTS golf game first on next-gen consoles.

Recent market rumors also suggest that EA may soon be entering into an agreement with Comcast to enable Comcast subscribers to use their cloud-connected X1 cable box system to buy games from EA through their televisions. The deal will grant access to streaming of video games such as FIFA and Madden to Comcast’s 22 million subscribers across the country.

EA’s stock is trading at $34.28 with market capitalization of $10.6 billion. It touched a five year high of $34.87 last week soon after the result announcement.

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