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EA's operating margin damaged by PS3 sales

2 August 2007

Electronic Arts CEO John Riccitiello has conceded that sales of PlayStation 3 have fallen slightly below the company's expectations, which he in turn felt contributed to a recent fall in the publishers operating margins that dropped from 20 per cent to 5 per cent since the previous console cycle.

Speaking during a quarterly conference call, Riccitiello observed how the next-generation market is currently taking longer to gain momentum compared to the previous console cycle, which was ultimately won by Sony's PlayStation 2 console.

"Point blank, this cycle is developing quite differently than the last cycle. The next-gen hardware build is going a little more slowly”, he said, noting how EA supported PS2 in a "gigantic way”.

The PS3’s performance to date has been somewhat more reserved than anticipated however, with Riccitiello stating, "This time, there's been some unexpected strength with the Wii and the PS3 hasn't--yet--performed as well as we expected it to. That probably has a bigger impact than any other factor on our margins."

However, he is confident that the release of titles such as the highly anticipated Grand Theft Auto 4 will be a "double positive" for the both the company and games industry, in addition to stimulating lagging hardware sales.

"Great software sells hardware," concluded Riccitiello.

Source: Next-Gen.biz


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