Summary
Electronic Arts Inc. (EA) reported a net loss of $641 million for the three months ended December 31, 2008, a significant increase from a net loss of $33 million in the prior year's comparable period. This widened loss was primarily driven by a substantial $368 million goodwill impairment charge related to its EA Mobile reporting unit and a $244 million discrete tax charge due to an increased valuation allowance on deferred tax assets. Net revenue for the quarter saw a modest increase of 10% to $1.654 billion, largely attributed to strong performance from titles like Rock Band 2. The company also announced a significant restructuring plan to reduce its workforce by 11% and close 12 locations, aiming for annual operating expense savings of $125 million starting in fiscal year 2010. The company is navigating a challenging economic environment, with reduced consumer spending impacting retailer inventory orders. Management expressed caution about future sales despite a growing installed base for next-generation consoles. The company's financial condition remains solid, with $2.261 billion in cash, cash equivalents, and investments as of December 31, 2008, though this represents a decrease from the prior fiscal year-end. EA is focused on investing in online products and services and managing costs through restructuring initiatives.
Financial Highlights
19 data pointsKey Highlights
- 1Reported a significant net loss of $641 million for the quarter ended December 31, 2008, largely due to a $368 million goodwill impairment charge and a $244 million tax valuation allowance increase.
- 2Net revenue increased by 10% to $1.654 billion for the quarter, with Rock Band 2 being a key driver.
- 3Announced a restructuring plan involving an 11% workforce reduction (approximately 1,100 employees) and closure of 12 locations, expecting $125 million in annual cost savings.
- 4Experienced a substantial decrease in cash, cash equivalents, and investments, falling to $2.261 billion from $3.016 billion at the prior fiscal year-end.
- 5Acknowledged cautious outlook due to the challenging economic environment and its impact on consumer spending and retailer orders.
- 6Introduced a new accounting policy for deferred net revenue for online-enabled games, impacting revenue recognition and potentially creating volatility in gross profit percentages.