Video game designer Electronic Arts (NASDAQ:ERTS) makes a living on innovation. Without a steady stream of new or updated games that appeal to the gamer community, EA is dead in the water. Unfortunately, that's exactly what the company looks like right now.

EA's first-quarter report was actually pretty good. GAAP sales fell 20% year-over-year in a seasonally challenged early summer quarter. EA lost $0.72 per share in GAAP net income terms, again worse than last year's $0.30 loss per share. As terrible as all of that sounds, analyst estimates and management guidance had been indicating even worse news. CEO John Riccitiello even told us that "good execution delivered better-than-expected financial results in the first quarter." This is no guessing game, folks. EA is happy about this quarter.

But that better-than-expected performance didn't change how EA sees the 2010 fiscal year working out. Despite happy surprises on both the top and bottom lines, the company is sticking stubbornly to previous guidance. And so the stock is trawling along at prices about 60% lower than the 52-week high of $50.17 per share.

How can EA snap out of this funk? Archrival Activision Blizzard (NASDAQ:ATVI) seems to be doing just fine by comparison. Take-Two Interactive (NASDAQ:TTWO) and THQ (NASDAQ:THQI) are beating EA in the all-important Wall Street game over the last six months, too -- EA is the only major video game producer that didn't beat the S&P 500 benchmark in the last half-year.

There are bright spots in all this darkness, though. EA has become a big presence in the wireless market, and sales to the cell-phone crowd now make up 6% of the company's sales. The Nintendo (OTC BB: NTDOY.PK) Wii is another winner: It's the only gaming console for which EA is selling more games than last year, rather than less. That platform represented fully 25% of EA's revenue this quarter, edging out sales for Sony's (NYSE:SNE) PlayStation 2 and 3 combined and putting the hammer down on the Microsoft (NASDAQ:MSFT) Xbox 360 with authority.

The slow summer season is slipping toward its finish. With the much more lucrative fall and holiday periods up ahead, this would be a good time for EA to right the ship. Rock Band: The Beatles might be its ticket to ride. But management's own pessimistic outlook can't be a good sign. EA may be cheap today, but it seems to be heading in the wrong direction entirely. All of the other big gaming stocks seem less risky.

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Activision Blizzard, Electronic Arts, and Nintendo are Motley Fool Stock Advisor selections. Microsoft is a Motley Fool Inside Value recommendation. Nintendo is a Motley Fool Global Gains selection. Try any of our Foolish newsletters today, free for 30 days.

Fool contributor Anders Bylund owns shares in Take-Two, but he holds no other position in any of the companies discussed here. You can check out Anders' holdings or a concise bio if you like, and The Motley Fool is investors writing for investors.