Electronic Arts Introduces Gaming On Kindle

According to researchers, retail sales of video game equipment and software in the United States fell 10% in August. Hardware sales declined 5% to $282.9 million and software sales fell 14% to $403.5 million. Overall, from January to August 2010, video game sales dropped 8% over the year.

Yet, Electronic Arts (NASDAQ:ERTS) managed to exceed market expectations in the recent quarterly results. Q1 revenues of $539 million were significantly higher than the market’s expected revenues of $502.9 million. For the quarter, the company reported a loss of $0.24 per share compared with the Street’s expected loss of $0.35 per share.

EA is following a three pronged strategy of releasing quality titles, driving digital revenues and ensuring operational efficiencies. Within the quarter, it released 2010 FIFA World Cup South Africa and Battlefield: Bad Company 2 game titles, which recorded sales of three million and one million units respectively in the first quarter, an indication of the strength of its titles.

EA is looking to increase its digital revenues by 30% during the year to $750 million and is driving digital revenues through a combination of paid, downloadable content and increasing their social gaming presence. Their iPad and iPhone applications are also generating big success with them being the leading publisher on the Apple apps store with nine of the top ten grossing games of the iPhone 4 launch. Mobile revenues constituted $52 million of the quarter’s revenues, with smartphone revenue growth compensating for the loss of feature phone revenues. It now has 34% of the U.S. feature phone game market. Further, EA is expanding across all platforms, has released FIFA 10 on Android, and is working on more titles for the Android platform.

It is also exploring other digital devices and has launched games to be played on Amazon’s Kindle. Earlier this month, Amazon itself launched two free word scramble game applications, Shuffled Row and Every Word, for the Kindle. But, priced at $4.99, EA’s Scrabble is the first paid game for the Kindle. While the game still lacks features compared with its iPad version, it does let users pass-n-play with another player, a feature not present in Amazon’s game applications. As of now, no other publisher has released  games for the reader, and within a few days of its launch, the game is already on Amazon’s top ten best seller app list, an indicator that EA is on the right track.

EA is also enhancing its social gaming presence. Analysts estimate that nearly 20% of the U.S. population aged six or over has played a game on a network, and 10% of this gaming population has spent money to play these games. EA now has over 60 million unique core registered users, compared with 33 million a year ago, and 15 million monthly active social game users. To continue increasing this number, it recently launched a Facebook version of their popular Madden football game. In an online take on the popular office betting pools, the version comes with features that lets Facebook users create their own fantasy squads by collecting NFL players and putting them together in a team against other Facebook users’ teams.

EA is projecting Q2 revenues in the range of $775 million–$825 million with a loss of $0.10-$0.15 per share compared with the market estimates of revenues of $816.8 million with a loss of $0.10 per share. For the full year, the company’s projections of revenues of $3.65 billion–$3.90 billion with EPS of $0.50–$0.70 were in line with the market’s projections of revenues of $3.8 billion with EPS of $0.64.

Their stock is trading at $16.46 with a market capitalization of $5.4 billion. It touched a 52-week high of $21.05 in October of last year.