Electronic Arts Needs Speed: Fool by Numbers

On Feb. 1, 2007, Electronic Arts (Nasdaq: ERTS  ) released third-quarter earnings for the period ended Dec. 31, 2006.

• Net revenue has increased by only 0.9%. Sales were driven by Need for Speed: Carbon, FIFA 07, The Sims 2: Pets, and Madden NFL 07 -- each of which sold more than 3 million copies.
• The industry is still transitioning to the latest consoles, Sony's (NYSE: SNE  ) PlayStation 3 and Microsoft's (Nasdaq: MSFT  ) Xbox 360. Operating and net margins are down, as the company continues to invest in developing new games.
• Electronic Arts is a three-star stock in our community-intelligence database, CAPS. Of 887 players, 803 think it will outperform the S&P 500. If you've got an opinion, bring it to CAPS!

(Figures in millions, except per-share data)

Income Statement Highlights

	Q3 2007	Q3 2006	Change
Sales	$1,281	$1,270	0.9%
Net Profit	$160	$259	(38.2%)
EPS	$0.50	$0.83	(39.8%)
Diluted Shares	319	311	2.6%

Get back to basics with a look at the income statement.

Margin Checkup

	Q3 2007	Q3 2006	Change*
Gross Margin	63.3%	60.5%	2.8
Operating Margin	16.8%	27.3%	(10.5)
Net Margin	12.5%	20.4%	(7.9)

*Expressed in percentage points.

Margins are the earnings engine. See how they work.

Balance Sheet Highlights

Assets	Q3 2007	Q3 2006	Change
Cash + ST Invest.	$2,646	$2,723	(2.8%)
Accounts Rec.	$551	$567	(2.8%)
Inventory	$72	$76	(5.3%)

Liabilities	Q3 2007	Q3 2006	Change
Accounts Payable	$170	$187	(9.1%)
Long-Term Debt	$0	$0	N/A

Learn the ways of the balance sheet.

Cash Flow Highlights

	Q3 2007	Q3 2006	Change
Cash From Ops.	$227	$278	(18.3%)
Capital Expenditures	$32	$31	3.2%
Free Cash Flow	$195	$247	(21.1%)

Find out why Fools always follow the money.

Related Companies:

• Konami (NYSE: KNM  )
• THQ (Nasdaq: THQI  )
• Take-Two Interactive Software (Nasdaq: TTWO  )

Related Foolishness:

• A Nielsen Family ... of Gamers?
• Dueling Fools: Electronic Arts
• Sony vs. Zelda

Electronic Arts is a Motley Fool Stock Advisor pick. To find out why, you can take a 30-day free trial of the newsletter. Microsoft is an Inside Value recommendation.

Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check Fool.com for more of our in-depth discussion of what the numbers mean. This data has been provided by Netscribes. To provide feedback on this article, please click on the "feedback" button below.