Electronic Arts’ Best Quarter May Be Behind It

Bolstered by strong sales of games like Dead Space 2 , Dragon Age II , and
Bulletstorm , Electronic Arts (NASDAQ: ERTS ) beat Wall Streets earnings
expectations late Wednesday and saw its stock rise 7% in recent Thursday
trading. But the rest of the year may not go as smoothly. While it once appeared
like the company would be able to maintain its positive momentum, its catalog of
late-2011 releases are under threat, putting recent gains at risk. The most
significant issues face the companys lucrative EA Sports titles . The looming
NFL lockout and the absence of the World Cup tournament are putting a
significant damper on Madden NFL 2012 and FIFA 2012 , entries in the companys
perennial best-selling franchises. The lack of a new major game in the companys
NBA Live (changed to NBA Elite last year, before being cancelled) series is also
a challenge, and an NBA work stoppage looms this fall. EA CEO John Riccitello
said that these problems represent a potential $250 million revenue challenge
for fiscal 2012, and the company adjusted its forecast to account for the worst.
Thats a small comfort to shareholders banking on strong sports game sales. The
other problem is that EAs multiplayer online game Star Wars: The Old Republic ,
intended as a competitor to Activision Blizzards (NASDAQ: ATVI ) World of
Warcraft , is likely going to be delayed until next year (although the company
has scheduled it for a release in the second half of 2011). Having already spent
massive sums on the games development costs have been rumored to be everywhere
between $80 million and $300 million EA needs to have its online Star Wars game
ready for consumers before Blizzard reveals its World of Warcraft follow-up,
code-named Titan . EAs digital games business, including social games on
Facebook and mobile games on Apples (NASDAQ: AAPL ) iPhone, remain a bright spot
for the rest of 2011. The companys digital sales for the previous fiscal year
totaled $811 million, handily beating expectations of just $750 million. Its
digital initiatives continue to grow by leaps and bounds, and on Tuesday, EA
acquired mobile and social game maker Firemint, maker of the popular iPhone game
Flight Control , for around $25 million. Unfortunately, the companys digital
business only makes up 20% of overall revenue. With uncertainty surrounding the
companys traditional game offerings for the rest of the year, a stock runup from
of more than 40% since late January may be hard to repeat anytime soon. As of
this writing, Anthony John Agnello did not own a position in any of the stocks
named here. Follow him on Twitter at  @ajohnagnello  and  become a fan of 
InvestorPlace on Facebook.