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EA posts disappointing third quarter results

Whilst it's already in the throes of a major cost-cutting and restructuring exercise, the proof of industry powerhouse Electronic Arts' weaker performance of late is shown in the release of its Q3 financial statements.

Whilst it's already in the throes of a major cost-cutting and restructuring exercise, the proof of industry powerhouse Electronic Arts' weaker performance of late is shown in its newly published Q3 financial statements.

Net revenue for the quarter ended December 31st was posted at USD 1.270 billion (EURO 1.052 billion), a drop of 11 per cent compared to the same period in 2004. Net revenue for the period was USD 259 million (EURO 214.5 million), which is a significant loss of 31 per cent on 2004's figures.

The decline is largely attributed to a soft market in both the US and Europe, as the industry continues its latest hardware transition, which in itself has been negatively impacted by the shortages experienced by Microsoft for its next-generation Xbox 360 console. The acquisition of mobile specialists Jamdat for approximately USD 680 million is also cited as a contributory factor to the decline.

The company recently announced further price cuts to a range of new releases, including top selling Need for Speed: Most Wanted, which is bound to have further implications on the company's fiscal performance, though it does reflect a trend in the overall market rather than anything specific to EA's performance.

The company has enjoyed considerable sales success in the quarter, with NBA Live 06, SSX on Tour, From Russia with Love, Battlefield 2: Modern combat and Tiger Woods PGA Tour 06 each selling more than a million units during the period. A further five titles - FIFA 06, Harry Potter and the Goblet of Fire, The Sims 2, Madden NFL 06 and Need for Speed: Most Wanted - each sold in excess of 2 million units for the quarter.

In contrast to the recent announcement of staff re-structuring and job cuts, the company has been quick to reaffirm its dominance of the global market, stating that it currently holds a 22 per cent revenue share in North America and 23 per cent revenue share in Europe, in addition to publishing four of the top 10 titles in North America and six of the top 10 in Europe during 2005.

EA chairman and CEO Larry Probst commented: "We ended 2005 in a very strong competitive position. We were number one on the PlayStation 2, the Xbox, PSP and PC in both North America and Europe. We also had a successful launch on the Xbox 360 and expect that we will be the number one publisher on this platform in 2006."

"Calendar 2006 will be a year of investment ahead of revenues," added CFO Warren Jenson. "Our resources will be focused on next-generation software and the global expansion of our online and mobile businesses."

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