Electronic Arts posts larger loss, cuts jobs & Motorola posts $397M 3Q loss; more job cuts

[Mrs. Sharon B. Hodge]

Electronic Arts posts larger loss, cuts jobs

NEW YORK - Video game publisher Electronic Arts Inc., whose titles include "Rock Band," posted a wider quarterly net loss Thursday and said it is laying off about 6 percent of its work force to cut costs as it heads into the most lucrative season for the games industry.

Higher development and marketing costs led to the bigger loss for the July-September period. The quarter's revenue surpassed Wall Street's forecast thanks to the success of games like "Spore" and "Madden NFL 09," but the company did not exude the cheery optimism that has characterized the video game industry in the past few months even amid the economic turmoil. The company's shares, which have been trading at their lowest level more than five years, tumbled in after-hours trading.

"Considering the slowdown at retail we've seen in October, we are cautious in the short term," said John Riccitiello, chief executive, in a statement. "Longer term, we are very bullish on the game sector overall and on EA in particular."

The company lost $310 million, or 97 cents per share, in the quarter, the second in its fiscal year. That was worse than the loss of $195 million, or 62 cents per share, a year earlier.

Sales jumped 40 percent to $894 million.

Excluding one-time items, EA says it lost 6 cents a share in the latest quarter, matching the expectation of analysts polled by Thomson Reuters.

Adjusted sales, which exclude deferred revenue for some online games, were $1.13 billion, beating expectations for $1.08 billion.

Chief Financial Officer Eric Brown said the company remains "cautiously optimistic" about the holidays. EA, like other video game companies, makes the bulk of its money in November and December.

"We have heard that retailer foot traffic is down in general, which is a negative," he said in an interview. "But we also know that retailers are increasing their shelf space (for video games ahead of the holidays)."

EA lowered its full-year profit outlook range because of the strengthening dollar and the delay of the latest "Harry Potter" game, though it kept its revenue forecast intact. The company expects to earn between $1 and $1.40 during the fiscal year, excluding items, down from its previous forecast of $1.30 to $1.70 in adjusted earnings. On this basis, analysts are predicting a profit of $1.42 for the year.

The job cuts will amount to between 500 to 600 positions across all functions and locations, EA said. While some of these jobs are open, most will involve layoffs. The company said it expects about $50 million in annual pretax cost savings as a result.

Shares of the Redwood City, Calif.-based company sank $4.03, or 14.5 percent, to $23.70 in after-hours trading. The stock had closed down 31 cents at $27.73.

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Motorola posts $397M 3Q loss; more job cuts


NEW YORK - Motorola Inc. posted a hefty loss in the third quarter Thursday, citing the continued troubles of its cell phone division. The company will postpone the planned spin-off of the unit, and cut more jobs.

The maker of communications gear said it would get rid of 3,000 jobs by April, with about 2,000 of them coming from the cell phone unit. The company last announced 2,600 job cuts in April.

Motorola lost $397 million, or 18 cents per share, in the July-September period. It had earned $60 million, or 3 cents per share, in the same period a year ago.

Sales fell 15 percent to $7.48 billion.

The loss included 23 cents of charges, mostly for restructuring costs. Without the charges, Motorola would have earned 5 cents a share, reflecting unexpectedly strong results in its non-cell phone operations. Analysts polled by Thomson Reuters had on average expected the company to earn 2 cents per share on revenue of $7.82 billion.

For the fourth quarter, Motorola said it expects to earn 2 cents to 4 cents per share. Analysts polled by Thomson Reuters had expected the company to earn 7 cents per share in the quarter, excluding items.

Shares of Motorola fell 29 cents, or 5.3 percent, to close at $5.17, even as broader markets ended up higher.

The job cuts are part of efforts to cut costs by $800 million next year, Chief Executive Greg Brown said.

Motorola sold 25.4 million cell phones in the third quarter, down from the 28.1 million it sold in the second quarter. The company had said it expected a slight decline. With an 8.5 percent market share, it lost the spot as No. 3 cell phone maker worldwide to Sony Ericsson in the quarter, according to research firm IDC. Nokia Corp. and Samsung Electronics Co. are No. 1 and No. 2, respectively.

For Motorola, "the loss of share continues to be extremely worrisome," said Rick Franklin, an analyst at Edward Jones. "This business continues to run without any wheels."

The cell phone unit lost $840 million, including a $370 million write-down of inventory. Revenue was $3.1 billion.

Sanjay Jha, who was appointed in August to lead the handset division, said the weak economy and stresses in the financial market were main reasons for the postponed spin-off. He said the unit would slim down its product portfolio and become a leaner organization.

Jha said the company had 20 major platforms for cell phones, making development unwieldy yet leaving Motorola with few products in the two categories that have been in demand this year: "smart" phones and very cheap phones.

He is pruning the portfolio to focus on three software systems: Windows Mobile, which Motorola already uses on a few smart phones; P2K, its own system, used on the Razr phone; and Android, a free operating system from Google Inc. Competitor HTC Corp. recently launched the first Android phone. Jha said Motorola will have one by the 2009 holiday season.

Designers at Motorola have been too focused on making "bright shiny objects," Jha said. In the future, he wants them to focus more on making phones easy to use.

The troubles of the cell phone division stem from its inability to produce a follow-up to a phone that was, for a while, the "bright shiny object" everyone had to have: the Razr phone.

Jha also said Motorola will pull back from the cell phone markets of Europe and parts of Asia, though Jha said China will remain a focus for the company, along with the Americas.

Motorola is not alone in seeing a decline in cell phone sales. IDC said Thursday that global handset shipments declined 0.4 percent from the second quarter to the third, even though the quarter normally sees a pre-holiday ramp-up.

Sales at Motorola's healthier units were essentially flat, and they boosted profits.

Home and Networks Mobility, which makes cable-TV set-top boxes, modems and related gear, saw its operating earnings increase 65 percent to $263 million, on $2.4 billion in sales.

Enterprise Mobility, which makes police radios and other communications equipment for organizations, posted operating earnings of $403 million, up 23 percent, on sales of $2 billion.