/// Ahead of Earnings: Can Electronic Arts Escape the Drag of Zynga’s Losses?
As the Olympics play out this week in London, there’s another pretty big games competition worth watching right at home. Electronic Arts and Zynga are duking it out for top honors among the best game companies in the world. However, neither of them are close to winning a gold at the moment. At last count, Zynga wildly missed analyst expectations for its second quarter, leading to a drop of more than 40 percent in its stock, sending it to an all-time low. The next day, EA’s shares came tumbling after, posting a new low for the year. Tomorrow, EA has a chance to regain investor confidence as it reports results for its fiscal first quarter. And while it may be easy to assume that if one company has a hard quarter, the other will too, that’s not what all the analysts are saying. Michael Pachter of Wedbush Securities said he isn’t revising his expectations based on Zynga’s poor performance. ”Zynga’s losses are other people’s gains,” he said. Pachter reasoned that since Facebook’s revenues from payments, which are used to make purchases inside social games, were up slightly in the second quarter vs. the previous period, it’s likely Zynga’s quarter had more to do with Zynga itself than any broad trend. Specifically, Zynga said it suffered after Facebook made changes to its network, which consequently led to a drop in bookings for the company’s older games. Wall Street analysts will be looking for EA to report a loss of 42 cents a share on revenues of $501 million, excluding some expenses. Based on the company’s internal guidance using the same non-GAAP metrics, it is expecting to lose between 40 to 45 cents a share on revenues of $500 million.