EA warns of weak sales, cites Xbox 360 shortages

"No. 1 video game maker says low supplies of Microsoft's new console causing weak holiday sales.

Top video game maker Electronic Arts Inc. warned that quarterly profit and revenue would be "well below" earlier estimates due to lackluster holiday sales that it blamed on shortages of the Xbox 360.
The warning Tuesday sent shares of Electronic Arts down 3.8 percent in after-hours trading Tuesday.

The publisher of titles like football game "Madden NFL 06" will miss its targets due to shortages of the new Xbox 360 video game console from Microsoft and as consumers wait for rival machines from Sony and Nintendo next year, executives said.

"There are rumors that the PlayStation 3 may launch as early as spring, and that's causing some people to evaluate whether to make a purchase now or wait," CEO Larry Probst told a conference call.

The soft spending means the overall market could be down double digits, with Electronic Arts' third-quarter revenue possibly falling in the mid-teens, Chief Financial Officer Warren Jenson said.

"We don't see them getting to the installed base numbers we had forecast when we gave previous guidance," Jenson said of Xbox 360 shipments.

EA gets about half of its revenue during its third quarter, which includes the U.S. holiday shopping season.

The warning also sparked a sell-off of other video game companies. Activision Inc., the No. 2 video game publisher, fell 1 percent, while Take-Two Interactive Software fell 2.8 percent and THQ fell 3 percent.

"There are 5 million people who really believe they are getting an Xbox 360 relatively soon, by February. Microsoft has shipped 500,000 units, so 4.5 million people are doing nothing. That's enough to just kill Christmas," said Michael Pachter, an analyst with Wedbush Morgan Securities." [more]