Arts (Lacy, 2004).
In addition, the company is dependent on hardware manufacturers to produce new versions of their game consoles that offer additional benefits to players. At this point, the market anticipates new versions of the Xbox, PlayStation and GameCube, but these are not expected to reach stores until sometime in 2005. This is expected to put downward pressure on demand for games from Electronic Arts and its competitors as consumers wait until the new consoles are released.
These external considerations are causing Electronic Arts to be cautious about its performance during the current holiday season. Although the company increased its second-quarter earnings from 25 cents per share to 31 cents per share, since the earnings failed to meet analysts' expectations, the price of the stock fell. Thus the company is forecasting earnings of $1.11 to $1.21 per share on sales of between $1.4 billion and $1.48 billion while analysts are expecting profits of $1.27 per share on sales of $1.5 billion. The analysts' expectations represent a one cent per share increase over 2003's holiday performance, while the company's projections represent a smaller profit margin (Lacy, 2004).
In June 2004, Electronic Arts announced that it would cease accepting advertising for online casinos on its Web site. Online gaming is considered illegal by American authorities, and Electronic Arts had a relationship with Forward Slash, an online gambling company based in South Africa. Online casinos are typically based outside the United States in countries such as South Africa or Costa Rica where their activities are considered legal. The move by Electronic Arts was expected to cost the company less than $5 million (Richtel, 2004).
The decision was based on increased scrutiny of relationships between American companies and offshore Internet gaming sites by the Justice Department. Although Electronic Arts was not being investigated at the time...