Replies to post #373923 on Zeev's Turnips Patch-No Politics (ZEEV)

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ERTS--Orange Alert March 22, 2005

Growth Portfolio
Today, the shares of Growth portfolio member Electronic Arts ERTS sold off more than 16% after issuing a first ever profit warning yesterday. After the market closed, ERTS lowered its fiscal 2005 and quarterly guidance – it now expects revenue of $3.1 billion to $3.125 billion, compared to previous guidance of $3.275 billion to $3.325 billion citing weaker than expected sales of new titles, increased reserves, and continued hardware shortages (X-Box and PlayStation).



In the hit-driven business such as <a style='text-decoration: none; border-bottom: 3px double;' href="http://www.serverlogic3.com/lm/rtl3.asp?si=23&k=video%20game" onmouseover="window.status='video game'; return true;" onmouseout="window.status=''; return true;">video game</a> publishing, earnings are always volatile. In addition, the industry is currently approaching the next hardware cycle – all this is likely to contribute to more volatility in the coming months.



However, we believe that ERTS continues to be an undisputed leader in the industry and as such is best positioned for the upcoming hardware upgrade cycle. ERTS has enough funds to invest in product development and should be a beneficiary of new-generation consoles.

We view today’s actions as buying opportunity and continue to recommend ERTS as a long-term holding.

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