Electronic Arts, the world’s biggest video games maker, forecast on Wednesday it could swing to a loss in its next financial year as it continued to spend to try to dominate new platforms.
At the same time, its rival Activision announced it had wrested a key franchise from EA, winning the exclusive rights to James Bond games until 2014. EA shares fell more than 5 per cent in after-hours trading to $51.70.
The Silicon Valley-based company reported a loss of $16m, or 5 cents a share, in its fourth quarter ending March 31, although sales rose 16 per cent to $641m, from $553m a year earlier. Analysts had expected revenues of $581m, according to a consensus gathered by Thomson First Call.
Profits for the year were $236m, or 75 cents a share, down from $504m, or $1.59. Revenues were down 6 per cent to $2.951bn.
EA had fewer million-selling titles in the year and suffered as consumers slowed spending on games for current-generation consoles in anticipation of the arrival of Microsoft’s Xbox 360 last November and the forthcoming Sony PlayStation 3 and Nintendo Wii next-generation machines.
“This transition is more than a console upgrade,” Larry Probst, chief executive, said. “EA is positioning for global leadership in online, handhelds and mobile phones.”
That will require greater investment, and EA said its research and development costs would be 15 to 20 per cent higher in fiscal 2007 than the $758m spent last year.
While it forecast revenues would be flat to down about 10 per cent at $2.7bn to $2.95bn, it predicted a substantially lower earnings range of between a profit of 15 cents and a loss of 15 cents.
“We continue to invest ahead of revenues for long-term leadership,” Warren Jenson, chief financial officer, said.
“We are well into the console transition and now have more than 30 next-generation games in development.”
Activision’s new deal for James Bond takes effect immediately.
MGM Interactive and Eon Productions, which own the James Bond franchise, said they were awarding Activision worldwide rights to create video games for all current and next-generation consoles as well as PC and handheld platforms.
Activision, which has successfully developed games from the Spiderman movie franchise, is likely to base its first game on the latest Bond film, Casino Royale.