May 5, 2011 12:58 am

EA predicts digital sales to surpass $1bn

Electronic Arts predicted digital sales would surpass $1bn in its current fiscal year in a riposte to the threat from social and mobile gaming companies such as Zynga.

The venerable video game publisher has been irked by comparisons with Zynga in recent months – funding rounds had given the four-year-old start-up a valuation in excess of $6bn, surpassing EA’s market capitalisation.

In fourth-quarter and full-year earnings announced on Wednesday, EA said digital revenues of $833m, which included mobile and social gaming, exceeded its target of $750m and were up 46 per cent on the previous year. The Fifa soccer franchise generated more than $100m in digital sales.

“We’re working very hard to increase our mix of digital revenues – it was 20 to 30 per cent of revenues in the fourth quarter alone,” said Eric Brown, chief financial officer, in a Financial Times interview. He added that the figure would be taken past $1bn in the current fiscal year.

EA’s traditional strength has been in “packaged goods” – the discs sold at retail for console and PC games – but it has made a big bet on digital expansion and developing sales of all forms of online content.

The San Francisco Bay Area company suffered the blow of John Schappert, its chief operating officer, leaving last month to join near neighbour Zynga, which has built its paper fortune with games on the Facebook social network.

But EA’s shares have been on the rise – up 25 per cent over the past six months providing a market cap of $6.65bn. They rose another 3 per cent to $20.50 in after-hours trading on Wednesday after the company reported profits and revenues ahead of expectations.

“We’re starting to hit our stride, this is five quarters in a row that we’ve exceeded Wall Street’s consensus,” said Mr Brown.

EA reported fourth-quarter revenues of $995m for profits of 25 cents a share, ahead of analyst expectations of $924m in revenues and earnings of 22 cents a share.

For the current fiscal year, it predicted revenues of about $3.85bn, shy of consensus forecasts of $3.9bn, while earnings of about 80 cents a share were below expectations of 86 cents.

Revenues could be hit by the delay announced on Wednesday for the latest title in the popular Mass Effect series. Mass Effect 3, due before the end of the calendar year, will not now appear until early next year, EA said.

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