Electronic Arts slashes outlook for 2010, cites weak demand in Europe

Electronic Arts lowers 2010 guidance as sales weak

NEW YORK — Video game publisher Electronic Arts Inc. cut its full-year guidance on Monday as it blamed weak demand in Europe and a shift toward games with lower profit margins in North America.

The news sent shares down sharply in extended trading.

For the fiscal year ending in March, EA lowered its adjusted profit outlook to between 40 cents and 55 cents per share. That is down sharply from its earlier outlook of 70 cents to $1 per share, and below analysts’ expectations of 79 cents per share, as polled by Thomson Reuters.

EA also gave a disappointing outlook for the October-December quarter, a crucial period for video game companies that rely heavily on holiday sales.

The company expects a third-quarter net loss to fall between 24 cents and 32 cents per share. Adjusted for changes in deferred revenue for digital content and online-enabled games, as well as restructuring charges and other items, EA expects earnings of 29 cents to 33 cents per share for the quarter, well below Wall Street’s expectations of 56 cents per share.

EA is forecasting sales of about $1.23 billion to $1.25 billion during the quarter. Adjusting for those same factors, EA expected adjusted revenue of $1.33 billion to $1.35 billion, short of Wall Street’s expectations of $1.42 billion in sales.

Last year was a challenging one for EA as well as for the video game industry, which took a late hit from the economic downturn after initially seeming resistant to the recession.

In November, the company cut its work force by 17 percent — 1,500 people — but also paid $275 million to buy Playfish Inc. a maker of social online games. The moves, announced on the same day, signaled EA’s attempts to align its business with a video game industry that’s evolving from selling packaged goods to distributing games online, on mobile devices and in bite-sized bits.

Shares in EA, which is based in Redwood City, Calif., dropped $1.79, or 9.8 percent, to $16.48 in after-hours trading as a result. The stock had closed down 13 cents at $18.27.