United Gamer Online (UGO)

By BARBARA ORTUTAY, AP Technology Writer Barbara Ortutay, Ap Technology Writer – Tue Aug 3, 7:21 pm ET

NEW YORK – Video game publisher Electronic Arts Inc. reported stronger results than it had forecast, boosted by solid sales of games such as "2010 FIFA World Cup South Africa," "Scrabble" for Apple Inc.'s iPad and digital add-on content for older titles.

EA, known for popular games such as the "Madden" football series and "The Sims," also cut operating expenses and reaffirmed its full-year guidance. Its shares got a boost in after-hours trading as a result.

For the three months ended June 30, EA's net income was $96 million, or 29 cents per share. This is up from a loss of $234 million, or 72 cents per share, in the same period a year earlier. Net revenue rose to $815 million from $644 million.

By a more closely watched metric — adjusted results that exclude special items and account for deferred revenue from games with online components — EA reported a loss and revenue decline. Even so, it handily surpassed Wall Street's expectations for the second quarter in a row.

"They are starting to put out games that are selling bigger and bigger units," said Sterne Agee analyst Arvind Bhatia, adding that EA was also moving in the right direction on the cost side of things.

The company's past results had been dragged by high game development costs and titles that did not always live up to lofty expectations. CEO John Riccitiello has been working to slim down EA's portfolio to high-quality games that make money, while pushing aggressively into new revenue streams such as Facebook games and digital add-ons for games sold in stores. He's also been cutting costs, much through layoffs. EA had 7,750 employees at the end of the quarter, down from 8,940 a year earlier.

On an adjusted basis, the company posted a loss of $78 million, or 24 cents per share in the latest quarter, compared with a loss of $6 million, or 2 cents per share, a year earlier. Analysts polled by Thomson Reuters had expected a larger adjusted loss of 35 cents per share.

Adjusted revenue fell 34 percent to $539 million from $816 million, but topped the $502 million that analysts were expecting.

Lower development costs helped bring down EA's operating expenses down 13 percent to $495 million during the quarter.

EA, which is based in Redwood City, Calif., also affirmed its guidance for the full fiscal year and said for the current quarter, it expects an adjusted loss of 15 cents to 10 cents per share on revenue of $775 million to $825 million.

This compares with analysts' expectations of a loss of 10 cents per share on revenue of $816.9 million.

The company noted that with the first quarter wrapped up, it still has about 86 percent of the year's revenue to go, which is one reason for not raising its full-year outlook prematurely. EA has been burned in the past by giving guidance that later proved to be too high.

The video game industry relies heavily on holiday sales — about 40 percent of its revenue is made in the last three months of the year. EA, for its part, would not make a profit in fiscal 2011 if it weren't for the October-December quarter. That quarter, said Bhatia, will be a "big test for them."

Chief Financial Officer Eric Brown said the strong quality of the titles EA is releasing is contributing to the company holding its outlook for the rest of the year even as broader consumer confidence is declining.

EA's shares rose 73 cents, or 4.5 percent, to $16.91 in after-hours trading. The stock closed regular trading down 32 cents, or 1.9 percent, at $16.18.