Electronic Arts 2Q Income Falls 57 Pct.

SAN JOSE, Calif. - Electronic Arts Inc., the world's biggest video game publisher, reported Thursday it beat Wall Street's earnings expectations with strong fiscal second-quarter sales, though profit fell 57 percent, hurt by the new accounting requirement of stock option charges.

Redwood City, Calif.-based EA also boosted its fiscal year outlook and predicted healthy sales for the holiday quarter, above analysts' expectations.

Shares of EA soared more than 7 percent on the news in after-hours trading, after closing the regular session at $53, up 24 cents, on the Nasdaq Stock Market.

Net income for the three months ended Sept. 30 was $22 million, or 7 cents per share, compared with $51 million, or 16 cents per share during the same period last year, the company said Thursday. The results included stock-based compensation charges of $33 million.

On an adjusted basis, excluding certain items, EA said it would have earned $65 million, or 21 cents per share, compared with $46 million, or 15 cents per share, last year.

Revenue rose 16 percent to $784 million from $675 million a year ago.

Analysts surveyed by Thomson Financial were expecting earnings of 2 cents per share on sales of $672.2 million.

Record sales of "Madden NFL 07" - EA sold five million copies in the five weeks after the game's August launch - as well as robust sales of EA's other popular sports titles, were key contributors to the strong quarter, company officials said.

For the past year, the video game software industry faced slower sales as consumers waited for new game console systems, which are now slated to go on sale later this month. But the second-quarter performance indicates that the video game market is still healthy, Warren Jenson, EA's chief financial officer, said in a phone interview.

"Revenue was strong and exceeded our expectations," Jenson said. "This was an exciting quarter and it's going to get that much more exciting with the consoles coming out."

Sales of games for older model machines are declining, but consumer interest in titles for Sony Corp.'s legacy PlayStation 2 system apparently remains strong. The best-selling platform, now in its sixth year with more than 106 million machines sold worldwide, still anchored 35 percent of EA's revenues in the quarter.

Meanwhile, sales of EA's games for Microsoft Corp.'s Xbox 360 are rising but accounted for 21 percent of the quarter's revenues. The Xbox 360 came out last November and will be competing against the upcoming PlayStation 3 and Nintendo Co. Wii.

EA officials said they are ready for the new console launches, with eight new titles set to be released in the quarter and more than 30 games in development for all the next-generation systems.

"We are well prepared for the holidays on all platforms," EA's Chief Executive Larry Probst said.

EA raised its outlook for its fiscal year ending March 31.

Annual revenue is now expected to be $2.95 billion to $3.13 billion, up from previous targets of $2.8 billion to $3 billion. Earnings are expected to be break-even to 15 cents per share, compared with a previous expectation of break-even to a loss of 30 cents per share.

For the key holiday quarter, EA projected revenue to be $1.2 billion to $1.3 billion. Analysts surveyed by Thomson Financial were expecting sales of $1.2 billion.