SAN FRANCISCO (Reuters) – Electronic Arts Inc, publisher of the “Battlefield” and “Star Wars” games, stuck to a forecast for about 30 percent growth in fiscal 2013 earnings and announced a $500 million share buyback, in a bid to prop up its shares.
“They think their shares are undervalued. we suppose it could be interpreted to mean they believe there’s good visibility to hit targets for the rest of the year,” RW Baird analyst Colin Sebastian said.
The company’s executive team has come under intense pressure as its stock touched historic lows in recent weeks.
Sterne Agee analyst Arvind Bhatia said that the company has announced and executed a share buyback before.
The board authorized the $500 million share buyback with an open time frame, Chief Financial officer Ken Barker told analysts on an earnings conference call.
As we noted earlier today, EA faces considerable financial challenges now as it tries to balance the sale of $60 retail games with the need to invest in digital games in the social, mobile, and online spheres.
Electronic Arts, which has been expanding its mobile and online gaming business, said on Tuesday its net digital revenue jumped 55 percent.
In early June, the company introduced a new service for players of “Battlefield 3″ with a one time fee of $50 this summer to boost its online sales and gain ground against its bigger rival, Activision Blizzard, which sells the top selling game title “Call of Duty.
“This “Battlefield 3 Premium” service generated $37 million in revenue in June, Barker said. “We will recognize these sales as revenue in the fourth quarter when we release the fifth expansion pack entitled ‘Endgame.
‘”EA’s smaller competitor, Take Two Interactive Software, also reported earnings on Tuesday.
The company that publishes the hit “Grand Theft Auto” posted a net loss and 32 percent drop in revenue in its fiscal first quarter, due to weak sales of its new title “Max Payne 3″ and “Spec Ops: The Line.”.
For the three months ended June 30, Electronic Arts posted overall revenue of $491 million, compared with $524 million a year ago.
This compared to non GAAP net income of $6.4 million, or $0.17 per diluted share, in the second quarter of 2011.
Excluding certain items, it recorded a loss of 41 cents a share, beating by a penny an average forecast for a 42 cent loss, according to Thomson Reuters we/B/E/S.
For fiscal 2013, Electronic Arts, which battles Activision Blizzard Inc and other publishers for a slice of a decelerating video games market, reaffirmed its outlook for earnings excluding items of $1.05 to $1.20 per share.
The game is now shifting to include a free to play option, where users play for free and pay real money for virtual goods.
But the stock price is at a historic low, and investors have focused on declining subscribers for EAs flagship online game, Star Wars: The Old Republic.
“We saw a lot of good traction there so we decided in the fall we would provide an opportunity for consumers to play the game free to play with some restrictions with an experience through micro based transactions,” Barker told Reuters.
Analysts believe the game, which cost a reported $200 million to make, had a chance to steal subscribers from World of Warcraft, which has dominated massively multiplayer online games for seven years and has more than 10 million paying subscribers.
The company had previously said the vast majority of Star Wars’ 1.3 million subscribers signed up for beyond the initial free trial.
Naomi Harris is a business journalist based in Darwin, Australia. Naomi has a passion for financial markets and breaking news stories and loves writing about business news, stock market, and economic opinions that matters most to its audience. Naomi spends a lot of time discovering and researching latest financial markets and industry news stories in order to make sure the latest and greatest stories are brought to you first on BigBoardNews.com.