On the heels of Activision's (NASDAQ:ATVI) solid first-quarter report, fellow Stock Advisor pick Electronic Arts (NASDAQ:ERTS) turned in some solid numbers of its own.
After the bell yesterday, EA said that first-quarter earnings grew 32% to $24 million, or $0.08 per diluted share, as net revenues climbed 22% to $432 million. The video game maker attributed the performance to strong sales of the Harry Potter game based on Time Warner's (NYSE:TWX) Prisoner of Azkaban movie, as well as the boxing title Fight Night 2004 and the soccer game UEFA Euro 2004.
EA also pointed to continued sales strength of MVP Baseball, as well as holiday super-smash-hit street racer Need for Speed Underground, which has already sold 7 million units. A sequel to that game will arrive later this year.
So the first quarter wasn't half bad for EA. But what the earnings report really signifies is that the fun this year is just beginning.
It's Madden time
Looking ahead to the new Madden season, EA forecast second-quarter earnings of $0.28 to $0.34 per share on $680 million to $715 million in revenues. According to CEO Larry Probst, week one sales of the NCAA Football game are tracking more than 50% ahead of last year, while preorders for the new Madden NFL game -- already the greatest franchise in video gaming -- "are at record levels."
Interestingly, there are a couple of new variables this year in the football competition.
One is that the Microsoft (NASDAQ:MSFT) Xbox version of Madden will be Xbox Live compatible (see EA Goes Xbox Live) -- previously, only the Sony (NYSE:SNE) PlayStation 2 versions of EA's games were exclusively online compatible. The other is that not only did Sega bring out its own much-heralded ESPN NFL 2K5 three weeks before Madden's scheduled release, but it also released it brand spankin' new at just $19.99!
In another twist, Sega's game is now being published and distributed by a division of Take-Two Interactive (NASDAQ:TTWO).
Sega's strategy won't affect Madden sales
As I noted last year, many die-hard gamers actually prefer Sega's sports titles to EA's, not the least of which is the football title. Personally, I've been a Madden-exclusive video gamer for as long as I've known the series (my previous favorite was Tecmo Bowl on Nintendo's original NES system). But even I couldn't resist picking up Sega's game yesterday for $20 -- that's just great quality and a pure value right there.
I mean, if you could buy a Class A share of Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) for $20 plus tax, then you'd do it, too.
That said, Sega's game quality hasn't stopped Madden -- or even EA's NCAA Football for that matter -- from blowing its NFL game sales away in the past. And if you were a Madden fan before, I'd suspect that you're going to buy Madden anyway. I think I have to: In my case, I'm pretty much locked into the control system, style of play, user interface, and all of the Maddenisms.
After all, once you've been Madden-ized for so long, it's not really as though you can just go and pick up something else. It's just not the same.
And EA's outlook hasn't changed much, either. For the full year, EA expects to earn $2.00 to $2.10 per share, with revenues coming between $3.3 billion and $3.4 billion.
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Fool contributor Jeff Hwang owns shares of Electronic Arts and Berkshire Hathaway.
