twolverton@mercurynews.com
Electronic Arts (ERTS) stock dropped as much as 10 percent Monday after the company announced a bevy of bad news, including a sharp decline in the number of subscribers to a high-profile game, a disappointing forecast for its current financial quarter and a $40 million restructuring plan.
The Redwood City-based video-game maker said the number of active subscribers to its “Star Wars: The Old Republic” game fell by 400,000 to 1.3 million from the beginning of February to the end of March. On a conference call with analysts and investors, EA executives attributed the decline to a drop-off in “casual” players and those who were just testing it out. A growing portion of the total number of subscribers are actually paying to play the game, they said.
EA invested years and millions of dollars into the massively multiplayer online game, which some analysts expected to rival Activision’s popular “World of Warcraft.” Company officials said they will continue to invest in the game and plan to focus on growing its subscriber base.
“I understand that a lot of investors are very interested in ‘Star Wars,’ ” said CEO John Riccitiello. But, he added, “The game’s performance is very much in line with our original assumptions … and what we’ve been guiding folks to over the last couple of years.”
The company’s take on the news seemed to help appease anxious shareholders. In after-hours trading following the call, EA’s stock was down 77 cents, or 5.1 percent, to $14.36. Before the call, the company’s shares were off as much as $1.52, or 10 percent.
Meanwhile, the company said in a statement that it will lay off an unspecified number of workers as part of the restructuring plan, which it began Monday and expects to have largely complete by Sept. 30. The company plans to incur charges related to layoffs and the canceling of some of its intellectual property licenses.
In a filing with the Securities and Exchange Commission, EA said the move was made “to align the company’s cost structure with its ongoing digital transformation.” In recent years, EA has been shifting its development efforts toward making mobile and social games, and also has bought companies to help with that effort.
EA spokesman Jeff Brown declined to say how many workers EA would lay off and whether any EA workers in the Bay Area would be affected. But Brown said the number of layoffs would be “small.” EA plans to hire in other areas of its company, he said. On the call, Ken Barker, EA’s interim chief financial officer, said the company expects to end its fiscal year with 9,700 employees, up from 9,200 now.
EA announced the restructuring despite posting financial results Monday that topped Wall Street’s expectations.
In the company’s fiscal fourth quarter, EA earned $400 million, or $1.20 a share, on sales of $1.37 billion. Those results topped the company’s performance from a year earlier, when it earned $151 million, or 45 cents a share, on sales of $1.09 billion.
Excluding deferred revenue and certain costs, including stock options charges, EA would have earned $56 million, or 17 cents a share, on sales of $977 million.
On this basis, analysts polled by Thomson Reuters expected the company to post a profit of 16 cents a share on $958.54 million in sales.
But the company offered mixed guidance for its new fiscal year.
For its first fiscal quarter, EA expects a pro forma loss of 40 to 45 cents a share on sales of $500 million. For the full year, the company expects a pro forma profit of $1.05 to $1.20 a share on sales of $4.3 billion.
Analysts had previously forecast a first-quarter loss of 33 cents a share on $577.91 million in sales. For the full year, analysts had expected EA to earn 84 cents a share on sales of $4.2 billion.
Earlier Monday, EA’s stock closed regular trading up a penny to $15.13 a share.
Contact Troy Wolverton at 408-840-4285. Follow him at Twitter.com/troywolv.
