EA warns of serious holiday quarter sales shortfall

Top publisher Electronic Arts has issued a warning to the stock market confirming that sales of videogames in the holiday quarter have fallen far below expectations, and may see a year on year percentage decline in the double digits.

In a warning issued by the company to the stock market yesterday, EA said that it will miss its previous estimates for the quarter, but declined to give new projections - with CFO Warren Jenson saying only that the sales decline may be in the "mid teens", in percentage terms.

The warning comes in the wake of weeks of reports of lower sales at retail, with NPD group reporting a massive 18 per cent year on year decline in sales for the month of November in North America.

The decline has also been felt acutely outside North America, with many videogame retailers here in the UK reporting slow trading, and some publishers - including Activision and Ubisoft - cutting prices on headline titles in an attempt to stimulate sales.

However, even more worryingly, EA doesn't believe that the problem is restricted to the holiday sales - and has also said that it will affect its projections for the fiscal fourth quarter, which runs from January through March.

Titles including James Bond: From Russia With Love, SSX On Tour and Battlefield 2: Modern Combat - all games from well-established franchises - are among the games witnessing slow sales, the company said.

The primary cause of the shortfall, according to EA, is the slower than expected growth of the installed base of both Microsoft's Xbox 360 and Sony's PlayStation Portable consoles.

Both systems have ended up with smaller installed bases than EA had projected for this point, most notably the Xbox 360 - which has shipped far fewer units both in North America and Europe than the publisher had hoped.

"There are rumours that the PlayStation 3 may launch as early as spring, and that's causing some people to evaluate whether to make a purchase now or wait," EA CEO Larry Probst speculated on a conference call with investors last night.

Probst also noted that sales of the PS2 have been slower than they might have been this Christmas, adding that a price cut would have helped to drive sales of the aging console.