Electronic Arts Inc, the biggest US video-game publisher, may exceed forecasts for fiscal third-quarter sales and profit in part because of sales of Harry Potter-related titles, analysts said.
The four games related to the Harry Potter and the Sorcerer's Stone movie are Electronic Arts' most successful new products, Chief Executive Larry Probst said in an interview.
Almost 5 million units have been sent to retailers, with reorders expected before year-end, he said.
The company is benefiting from strong demand for video games and interest in products related to the record-breaking movie, said James Lin, an analyst at Jefferies & Co, who had forecast sales of 3 million units. Families are spending more time at home because of the recession, making games an attractive entertainment choice, Probst said. The movie is based on the best-selling children's book about an orphan who discovers he is a wizard.
"Harry Potter has been a good initial surprise," said Dan Prudential Securities Inc analyst Shekhar Pramanick lowered his 2002 profit target to US$0.26 a share from US$0.75. Merrill Lynch's Brett Hodess reduced his estimate to US$0.04 from US$0.40, and Goldman's Covello expects the company to break even next year.
Wasiolek, a research associate with Driehaus Capital Management, which manages US$3 billion and owns Electronic Arts shares. "The holiday season in general has been pretty strong."
Electronic Arts released its Harry Potter games for Sony Corp's PlayStation, Nintendo Co's Game Boy Color and Game Boy Advance and personal computers earlier this month.
"Harry Potter is doing sensationally well," Probst said.
"It has significantly exceeded our expectations." More than 35 percent of the Harry Potter games have been sold at retail, he said.
"We're fully expecting to get some reorders," he said.
Electronic Arts plans other Harry Potter games for PlayStation2 and Nintendo's new GameCube next year, Probst said.
In the quarter ending in December, Electronic Arts, which also makes The Sims and Madden NFL, is expected to earn US$0.87 a share, excluding certain items, on sales of US$712.3 million, the average estimates from a poll of analysts from Thomson Financial/First Call.
Electronic Arts may top those estimates, Lin said. "It's a combination of things: It's the holiday season, it's the cocooning phenomenon, it's the new focus on family values."
Rivals Activision Inc and THQ Inc may also beat forecasts because of strong sales of video games, he said.
Probst declined to comment on the potential for exceeding expectations.
"We have not changed our guidance," he said.
Hits such as Harry Potter must be balanced against other titles that may be lagging sales expectations, said Edward Williams, an analyst at Gerard Klauer Mattison, who rates the shares "buy."
"You wash it all together and there's a good possibility upside in the quarter could come from Harry Potter," Williams said.
"Everything we have heard anecdotally suggests that the market is performing better than expected." Electronic Arts may have paid as much as US$25 million to US$30 million to AOL Time Warner Inc for rights to make games based on the movies, Williams said.
"We paid a lot," Probst said, declining to provide a specific number.
"We're happy we paid whatever we did at this point." Probst also said Electronic Arts will discontinue the online game "Majestic," which he said had sold poorly despite critical acclaim.
The Internet game Motor City Online, introduced earlier this month, has about 17,000 subscribers, Probst said.
That's "in the neighborhood" of the company's expectations, he said, declining to comment on future sales targets for the title.
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