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Video Game Industry Concerns Continue As EA Shares Drop

Posted on: Wednesday, 5 August 2009, 14:05 CDT

Electronic Arts failed to quell concerns about the gaming industry's health as its shares slid nearly 7 percent on Wednesday, Reuters reported.

EA previously reported better-than-expected results in the June quarter and managed to double its revenue on titles for Nintendo's popular Wii console.

However, the industry remains weak and retailers continue to be cautious about ordering games, according to Chief Executive John Riccitiello.

EA said this year’s sales of packaged software in North America and Europe are expected to be about the same as in 2008, versus a previous forecast for low- to mid-single-digit growth.

The company indicated some weakness in sales of the recently released "NCAA Football," although its non-GAAP revenue climbed 34 percent on strong sales of "The Sims 3" and "EA Sports Active".

But many analysts expressed concerns about titles for the rest of 2009.

MKM Partners analyst Eric Handler said EA lacks a critical mass of upcoming must-have titles with top-selling potential, particularly during this year's holiday period.

"As such, we would not be surprised to see retailers take a more measured approach to stocking the company's games," he wrote.

EA's catalog business was 18 percent of revenue in the June quarter, down from 28 percent last year, Handler added.

The economic downturn has made consumers more reluctant to spend on gaming accessories, creating a difficult year for the video game industry as a whole.

Research group NPD said U.S. video game sales in June registered their biggest drop since 2000.

Electronic Arts shares fell $1.51 to $20.38 in midday trade on the Nasdaq.

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Source: redOrbit Staff & Wire Reports

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