Electronic Arts (NASDAQ:ERTS) won't be expecting much in its stockings this Christmas, forecasting a flat holiday quarter compared with last year's. While many companies would be satisfied with the company's results of a 27% year-over-year increase in earnings per diluted share to $0.31, Wall Street is not as charitable when you're the largest video game company in Whoville. Though results were in line with EA's guidance, analysts had expected four cents a share more. The stock reacted accordingly, dropping 6% in after-hours trading.

To be fair, the high expectations were due to the strength of the titles released during the quarter. The Maddening crowd is far from abating for EA, with the EA Sports crown jewel selling more than 4 million copies. Other titles selling more than a million were The Sims 2, NCAA Football 2005, and Burnout 3. The strong sales were tempered with R&D costs increasing by 40% year over year, taking a toll on earnings.

The low guidance for the next quarter is likely because EA does not have a strong contender to slug it out with Take-Two's (NASDAQ:TTWO) Grand Theft Auto: San Andreas or Microsoft's (NASDAQ:MSFT) Halo 2 during the holiday season. While the company has a lineup of 10 to 15 titles planned, none of them have the clout to take on its rivals' flagship franchises head-on.

A big issue in the conference call was the threat posed by Sega and Take-Two's ESPN sports line and whether that would eat into EA's profits. We have already dissected this matchup in detail.

Not all the news is bleak, however. The introduction of two consoles in November should provide a boost for EA. The Nov. 1 launch of Sony's (NYSE:SNE) sleeker redesign of the PlayStation 2 should be a catalyst for more game sales, and as the largest publisher for that console EA stands to gain the most from sales of the hardware. EA also has core franchises such as Madden NFL 2005 and Tiger Woods PGA Tour Golf standing by for release with Nintendo's new portable system, the Nintendo DS, on Nov. 21.

Remember, despite a disappointing forecast, this is still the Numero Uno video game company -- fiscal 2004 sales exceeded those of Take-Two, Activision (NASDAQ:ATVI), and THQ (NASDAQ:THQI) combined. The pullback induced by EA's pessimism for the holidays may provide an excellent entry point for investors looking to get in early on the bonanza expected from next-generation consoles.

Both Electronic Arts and Activision are Motley Fool Stock Advisor recommendations. Learn more today by subscribing without risk for six months.

Fool contributor Tim Goh does not own any stake in the companies mentioned.