Stormy waters ahead for Electronic Arts ?

By Derek Sooman on March 29, 2005, 6:04 PM
Things are not looking good for games publisher Electronic Arts who last week was giving surprise profit warnings, and this week is hit with a series of shareholder lawsuits. On March 21st, EA said that it was now expecting net earnings of $1.62 to $1.64 per share for its 2005 fiscal year, compared with the previous forecast of $1.82 to $1.87. There has now followed four class-actions suits that charge that EA issued false and misleading public statements before the warning, which prompted a dramatic dip in EA's share price.

EA blamed the shortfall on a number of factors, including unexpectedly strong competition at the end of 2004 from games such as "Halo 2," "Grand Theft Auto: San Andreas" and the online fantasy game "World of Warcraft."

EA executives said holiday shortages of video game hardware, including widespread shortages of Sony's market-leading PlayStation 2, also hurt game sales overall. "We clearly underestimated the impact of the hardware shortages on our Q4 sales," CFO Warren Jenson told news service Reuters at the time.

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