ELECTRONIC ARTS REPORTS SECOND QUARTER RESULTS

REDWOOD CITY, Calif.--(BUSINESS WIRE)--Oct. 19, 2004--Electronic Arts (Nasdaq:ERTS - News) today announced financial results for the fiscal second quarter ended September 30, 2004.

Net revenue was $716 million, up 35 percent as compared with $530 million for the fiscal quarter ended September 30, 2003. Sales were driven by Madden NFL 2005, The Sims^TM 2, Burnout^TM 3: Takedown^TM and NCAA^® Football 2005 -- each reaching platinum status (over one million copies sold) in the quarter.

Madden NFL 2005 has sold over 4 million copies since launch. The Sims 2 and Burnout 3: Takedown have each sold over one million copies in Europe alone.

Net income for the second quarter was $97 million, a 27 percent increase year-over-year. Diluted earnings per share were $0.31 as compared to $0.25 a year ago.

Non-GAAP net income for the second quarter was $98 million, a 27 percent increase. Non-GAAP diluted earnings per share were $0.31 as compared to $0.25 a year ago. (Please see Non-GAAP Financial Measures and reconciliation information included in this release.)

Trailing twelve month operating cash flow was $664 million as compared to $657 million for the same period a year ago.

EA's Board of Directors has authorized a share repurchase program of up to $750 million. EA may purchase the Company's common stock from time to time in the open market or through privately negotiated transactions over the next 12 months.

"We enter the holidays with strong momentum in North America, Europe and Asia," said Larry Probst, Chairman and Chief Executive Officer. "EA SPORTS is having its best year ever and The Sims 2 had the strongest PC launch in EA's history. In the December quarter, the breadth and quality of our global line-up is exceptional, with eleven new releases expected to achieve platinum status."

"We are fortunate to be in a strong financial position," said Warren Jenson, Chief Financial and Administrative Officer. "We have the financial strength to invest for the long term, maintain strategic flexibility and at the same time return capital to our shareholders through our share repurchase program."

Current Highlights (comparisons are to the quarter ended September 30, 2003)

The Sims 2 sold through more than one million copies worldwide within the first ten days of release - the biggest PC launch in EA's history.

Madden NFL 2005 became the #1 selling game of the year in North America -- in just one month.

Net revenue: North America -- up 32 percent to $473 million; Europe -- up 45 percent to $210 million; Asia Pacific -- up 21 percent to $21 million; Japan -- up 29 percent to $12 million. Reported net revenue increased by approximately $23 million or 4 percent due to changes in foreign currency rates.

Gross margin was 60.3 percent -- compared to 59.7 percent a year ago.

Operating income was $125 million -- compared to $102 million. Operating margin was 17.4 percent -- compared to 19.2 percent a year ago.

The acquisition of Criterion Software was completed in October, bringing the Burnout^TM and Black franchises and RenderWare^® technology to EA.

The Company announced plans to build a studio in China focused on creating games for this market.

EA received 4 out of the "Top Five PC Games with the Highest Expectations" awards and 2 out of the "Top Five Most Popular PC Games" awards at China Joy, China's equivalent to E3.

Business Outlook

The following forward-looking statements reflect expectations as of October 19, 2004. Results may be materially different and are affected by many factors, such as changes in foreign exchange rates, the overall global economy, the popular appeal of our products, our effective tax rate, development delays, our ability to secure key licenses and other factors detailed in this release and in our annual and quarterly SEC filings.

Fiscal Third Quarter Expectations -- Ending December 31, 2004

Net revenue is expected to be between $1.4 and $1.475 billion -- as compared to $1.475 billion for the prior year.

Non-GAAP diluted earnings per share are expected to be between $1.16 and $1.26 -- as compared to $1.26 for the prior year. This range does not factor in five cents of estimated charges related principally to our acquisition of Criterion Software.

GAAP diluted earnings per share are expected to be between $1.11 and $1.21 -- as compared to $1.26 for the prior year.

Fiscal Year Expectations -- Ending March 31, 2005

Net revenue is expected to be between $3.275 and $3.4 billion -- as compared to $2.957 billion for fiscal 2004.

Non-GAAP diluted earnings per share are expected to be between $1.90 and $2.10 -- as compared to $1.84 for fiscal 2004. This range does not factor in six cents of estimated charges related principally to our acquisition of Criterion Software.

GAAP diluted earnings per share are expected to be between $1.84 and $2.04 -- as compared to $1.87 for fiscal 2004.

Our expected results include the projected impact of our share repurchase program.

Non-GAAP Financial Measures

Electronic Arts uses non-GAAP measures of operating income, net income and diluted earnings per share. These non-GAAP measures exclude the following items, including any related tax effect, from the Company's statement of operations:

Amortization of intangibles and employee stock-based compensation

Restructuring and asset impairment charges

Other-than-temporary impairment of investments in affiliates

Charges for acquired in-process technology

The Company believes that excluding these items is useful for illustrating and explaining operating results and comparisons to prior periods. Management considers these non-GAAP measures in its decision-making to facilitate more relevant operating comparisons.

A reconciliation of GAAP operating income to non-GAAP operating income; GAAP net income to non-GAAP net income; and GAAP diluted earnings per share to non-GAAP diluted earnings per share are included as part of the supplemental disclosures to this release.

Conference Call

Electronic Arts held a conference call on October 19, 2004 at 2:00 pm PT (5:00 pm ET) to review the results for the Company's second quarter ended September 30, 2004. Listeners may access the conference call live via webcast (http://investor.ea.com). A webcast archive of the conference call will be available for one year at http://investor.ea.com.

Some statements set forth in this release, including those under the heading "Business Outlook," contain forward-looking statements that involve risks and uncertainties. Statements including words such as "anticipate", "believe" or "expect" and statements in the future tense are forward-looking statements. These forward-looking statements are subject to business and economic risks and actual events or actual future results could differ materially from those set forth in the forward-looking statements due to such risks and uncertainties. Some of the factors which could cause our results to differ materially from our expectations include the following: our ability to predict consumer preferences among competing hardware platforms; the seasonality and cyclical nature of the interactive game segment; timely development and release of our products; our ability to secure licenses to valuable entertainment properties on favorable terms; consumer spending trends; our ability to attract and retain key personnel; changes in effective tax rates; adoption of new accounting regulations and standards; potential regulation of our products in key territories; developments in the law regarding protection of our products; fluctuations in foreign exchange rates; and other factors described in our Annual Report on Form 10-K for the year ended March 31, 2004 and in our Form 10-Q for the quarter ended June 30, 2004. We do not intend to update these forward-looking statements, including those made under the "Business Outlook" heading.

Note to Editors: The Sims and John Madden Football are trademarks or registered trademarks of Electronic Arts Inc. in the U.S. and/or other countries. Burnout, TakeDown and RenderWare are trademarks of Criterion Software Limited. NFL, NCAA, Tiger Woods & PGA TOUR are trademarks of their respective owners and used with permission. All other trademarks are the property of their respective owners.