REDWOOD CITY, Calif.–(BUSINESS WIRE)–May 13, 2008–Electronic Arts (NASDAQ:ERTS) today announced preliminary financial results for its fiscal fourth quarter and fiscal year ended March 31, 2008.

Full Year Results

Net revenue for the fiscal year ended March 31, 2008 was $3.665 billion, up 19 percent as compared with $3.091 billion for the prior year. Beginning in fiscal 2008, EA no longer charges for its service related to certain online-enabled packaged goods games. As a result, the Company recognizes revenue from the sale of these games over the estimated service period. The Company ended the year with $387 million in deferred net revenue related to its service for certain online-enabled packaged goods games, which will be recognized in future periods.

Non-GAAP net revenue(1) was $4.020 billion, up 30 percent as compared with $3.091 billion for the prior year.

EA had 27 titles that sold more than one million copies in the year as compared with 24 titles in the prior year.

Net loss for the year was $454 million as compared with net income of $76 million for the prior year. Diluted loss per share was $1.45 as compared with diluted earnings per share of $0.24 for the prior year.

Non-GAAP net income(1) was $339 million as compared with $247 million a year ago, up 37 percent year-over-year. Non-GAAP diluted earnings per share were $1.06 as compared with $0.78 for the prior year.

Trailing-twelve-month operating cash flow was $338 million as compared with $397 million a year ago. The Company ended the year with cash and short-term investments of $2.287 billion.

Fiscal Fourth Quarter Results (comparisons are to the quarter ended March 31, 2007)

Net revenue for the fourth quarter was $1.127 billion, up 84 percent as compared with $613 million for the prior year. During the quarter, EA had a net benefit of $208 million related to the recognition of deferred net revenue for certain online enabled packaged goods games.

Non-GAAP net revenue(1) was $919 million, up 50 percent as compared with $613 million for the prior year. Sales were driven by the launches of ARMY OF TWO(TM) and Burnout(TM) Paradise as well as the continued strength of Rock Band(TM).

Net loss for the quarter was $94 million as compared with a net loss of $25 million for the prior year. Diluted loss per share was $0.30 as compared with diluted loss per share of $0.08 for the prior year.

Non-GAAP net income(1) was $30 million as compared with $19 million a year ago. Non-GAAP diluted earnings per share were $0.09 as compared with $0.06 for the prior year.

“A year ago, we committed to an aggressive change agenda at EA. Our employees stepped up to the challenge and we finished fiscal year 2008 with non-GAAP revenue up 30% to $4 billion — a record for any third-party publisher. Our operating margins were flat to our prior year. On balance, we’re very pleased with our revenue growth, but not yet happy with our profit margins,” said John Riccitiello, Chief Executive Officer. “In fiscal 2009, we expect to deliver another $1 billion in revenue growth and to double our operating profit on the strength of our slate of titles.”

Highlights for the Year (comparisons are to the fiscal year ended March 31, 2007)
– In fiscal 2008, EA was the number one publisher across all
platforms in North America with 19 percent share and in Europe
with 20 percent share.

– On the Wii(TM), EA was the number one third-party publisher in
Europe in fiscal 2008 with 15 percent share — up eight points
from a year ago; in North America, EA had 11 percent share –
up one point from a year ago.

– EA Partners posted its strongest year ever driven by Rock Band
and Half Life(R) 2: Orange Box.

– EA had 15 double platinum (sold over 2 million copies) titles
in the year — up from ten a year ago.

– The Sims(TM) franchise sold over 100 million copies life to
date.

– EA strengthened its wholly-owned portfolio — by launching six
new games — MySims(TM), ARMY OF TWO, SKATE, Boogie(TM), EA
Playground(TM) and Smarty Pants(TM).

– Burnout Paradise, ARMY OF TWO and the recently launched Boom
Blox(TM) debuted with strong quality ratings from critics.

– Pogo(TM) has surpassed the $100 million mark in revenue –
growing 41 percent year-over-year.

– EA signed an agreement with Hasbro for the exclusive rights to
create digital games based upon intellectual properties
including MONOPOLY, SCRABBLE, YAHTZEE, NERF, TONKA and
LITTLEST PET SHOP.

– EA acquired BioWare Corp.(TM) and Pandemic(TM) Studios in
January 2008, adding strong development talent and ten new
franchises.

– EA’s December 2007 employee satisfaction survey showed
significant improvement over the last appraisal in 2004.
Results included a double-digit gain in employee engagement.

Business Outlook

The following forward-looking statements, as well as those made above, reflect expectations as of May 13, 2008. Results may be materially different and are affected by many factors, including: development delays on EA’s products; competition in the industry; changes in anticipated costs, expected savings and impact on EA’s operations of the Company’s reorganization plan; consumer demand for console hardware and the ability of the console manufacturers to produce an adequate supply of consoles to meet that demand; consumer demand for games for legacy consoles, particularly the PlayStation(R)2; the financial impact of potential future acquisitions by EA, including the potential acquisition of Take-Two Interactive Software, Inc.; the popular appeal of EA’s products; changes in foreign exchange rates; the overall global economy; EA’s effective tax rate; and other factors detailed in this release and in EA’s annual and quarterly SEC filings.

Fiscal Year Expectations – Ending March 31, 2009
– GAAP net revenue is expected to be between $4.9 and $5.15 billion.
– Non-GAAP net revenue(1) is expected to be between $5.0 and $5.3
billion.
– GAAP diluted earnings per share are expected to be between $0.25
and $0.52.
– Non-GAAP diluted earnings per share(1) are expected to be between
$1.30 and $1.70.
– Expected non-GAAP net income(1) excludes the following pre-tax
items from expected GAAP net income:
— $100 to $150 million for the impact of the change in deferred
net revenue (packaged goods and digital content),
— $240 million of estimated stock-based compensation,
— $65 million of amortization of intangible assets, and
— $25 million of restructuring charges.
– Non-GAAP tax expense is expected to be $85 to $95 million higher
than GAAP tax expense.

Beginning in fiscal 2009, the Company will use a long-term normalized tax rate for evaluating operating performance, as well as planning, forecasting and analyzing future periods, and assessing the performance of its management team. Based on its current long-term projections, the Company intends to use a long-term normalized non-GAAP tax rate of 28 percent.

Conference Call

Electronic Arts will host a conference call today at 2:00 pm PT (5:00 pm ET) to review its results for the fourth quarter and fiscal 2008 ended March 31, 2008 and its outlook for the future. During the course of the call, Electronic Arts may also disclose material developments affecting its business and/or financial performance. Listeners may access the conference call live through the following dial-in number: (877) 856-1960, access code 220497, or via webcast: http://investor.ea.com.

A dial-in replay of the conference call will be provided until May 20, 2008 at (719) 457-0820, access code 220497. A webcast archive of the conference call will be available for one year at http://investor.ea.com.

(1) Non-GAAP Financial Measures

To supplement the Company’s unaudited condensed consolidated financial statements presented in accordance with GAAP, Electronic Arts uses certain non-GAAP measures of financial performance. The presentation of these non-GAAP financial measures is not intended to be considered in isolation from, as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP, and may be different from non-GAAP financial measures used by other companies. In addition, these non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the Company’s results of operations as determined in accordance with GAAP. The non-GAAP financial measures used by Electronic Arts include: non-GAAP net revenue, non-GAAP gross profit, non-GAAP operating income (loss), non-GAAP net income (loss) and historical and estimated non-GAAP diluted earnings (loss) per share. These non-GAAP financial measures exclude the following items, if any, from the Company’s unaudited condensed consolidated statements of operations:
– Change in deferred net revenue (packaged goods and digital
content)

– Acquisition-related charges

– Amortization of intangibles

– Certain litigation expenses

– Losses on strategic investments

– Restructuring charges

– Stock-based compensation

– Income tax adjustments

Through the end of fiscal 2008, Electronic Arts made certain income tax adjustments to its non-GAAP financial measures to reflect the income tax effects of each of the items it excluded from its pre-tax non-GAAP financial measures, as well as certain discrete one-time income tax adjustments. This approach was consistent with how the Company evaluated operating performance, planned, forecasted and analyzed future periods, and assessed the performance of its management team.

Beginning in fiscal 2009, the Company will use a long-term normalized tax rate for evaluating operating performance, as well as planning, forecasting and analyzing future periods, and assessing the performance of its management team. Based on its current long-term projections, the Company intends to use a long-term normalized non-GAAP tax rate of 28 percent.

Electronic Arts may consider whether other significant non-recurring items that arise in the future should also be excluded in calculating the non-GAAP financial measures it uses.

Electronic Arts believes that these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding the Company’s performance by excluding certain items that may not be indicative of the Company’s core business, operating results or future outlook. Electronic Arts’ management uses, and believes that investors benefit from referring to, these non-GAAP financial measures in assessing the Company’s operating results both as a consolidated entity and at the business unit level, as well as when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate comparisons of the Company’s performance to prior periods.

In addition to the reasons stated above, which are generally applicable to each of the items Electronic Arts excludes from its non-GAAP financial measures, the Company believes it is appropriate to exclude certain items for the following reasons:

Amortization of Intangibles. When analyzing the operating performance of an acquired entity, Electronic Arts’ management focuses on the total return provided by the investment (i.e., operating profit generated from the acquired entity as compared to the purchase price paid) without taking into consideration any allocations made for accounting purposes. Because the purchase price for an acquisition necessarily reflects the accounting value assigned to intangible assets (including acquired in-process technology and goodwill), when analyzing the operating performance of an acquisition in subsequent periods, the Company’s management excludes the GAAP impact of acquired intangible assets to its financial results. Electronic Arts believes that such an approach is useful in understanding the long-term return provided by an acquisition and that investors benefit from a supplemental non-GAAP financial measure that excludes the accounting expense associated with acquired intangible assets.

In addition, in accordance with GAAP, Electronic Arts generally recognizes expenses for internally-developed intangible assets as they are incurred, notwithstanding the potential future benefit such assets may provide. Unlike internally-developed intangible assets, however, and also in accordance with GAAP, the Company generally capitalizes the cost of acquired intangible assets and recognizes that cost as an expense over the useful lives of the assets acquired (other than goodwill, which is not amortized, and acquired in-process technology, which is expensed immediately, as required under GAAP). As a result of their GAAP treatment, there is an inherent lack of comparability between the financial performance of internally-developed intangible assets and acquired intangible assets. Accordingly, Electronic Arts believes it is useful to provide, as a supplement to its GAAP operating results, a non-GAAP financial measure that excludes the amortization of acquired intangibles.

Stock-Based Compensation. Electronic Arts adopted SFAS 123(R), “Share-Based Payment” beginning in its fiscal year 2007. When evaluating the performance of its individual business units, the Company does not consider stock-based compensation charges. Likewise, the Company’s management teams exclude stock-based compensation expense from their short and long-term operating plans. In contrast, the Company’s management teams are held accountable for cash-based compensation and such amounts are included in their operating plans. Further, when considering the impact of equity award grants, Electronic Arts places a greater emphasis on overall shareholder dilution rather than the accounting charges associated with such grants.

Video game platforms have historically had a life cycle of four to six years, which causes the video game software market to be cyclical. The Company’s management analyzes its business and operating performance in the context of these business cycles, comparing Electronic Arts’ performance at similar stages of different cycles. For comparability purposes, Electronic Arts believes it is useful to provide a non-GAAP financial measure that excludes stock-based compensation in order to better understand the long-term performance of its core business.

Restructuring Charges. Although Electronic Arts has engaged in various restructuring activities in the past, each has been a discrete, extraordinary event based on a unique set of business objectives. Each of these restructurings has been unlike its predecessors in terms of its operational implementation, business impact and scope. The Company does not engage in restructuring activities on a regular basis or in the ordinary course of business. As such, the Company believes it is appropriate to exclude restructuring charges from its non-GAAP financial measures.

Change in Deferred Net Revenue (Packaged Goods and Digital Content). Beginning in fiscal 2008, Electronic Arts was no longer able to objectively determine the fair value of the online service included in certain of its packaged goods games and online content. As a result, the Company began recognizing the revenue from the sale of these games and content over the estimated online service period. Although Electronic Arts defers the recognition of a significant portion of its net revenue as a result of this change, there has been no adverse impact to its operating cash flow. Internally, Electronic Arts’ management excludes the impact of the change in deferred net revenue related to packaged goods games and digital content in its non-GAAP financial measures when evaluating the Company’s operating performance, when planning, forecasting and analyzing future periods, and when assessing the performance of its management team. The Company believes that excluding the impact of the change in deferred net revenue from its operating results is important to facilitate comparisons to prior periods during which the Company was able to objectively determine the fair value of the online service and not delay the recognition of significant amounts of net revenue related to online-enabled packaged goods.

In the financial tables below, Electronic Arts has provided a reconciliation of the most comparable GAAP financial measure to each of the historical non-GAAP financial measures used in this press release.

Forward-Looking Statements

Some statements set forth in this release, including the estimates under the headings “Business Outlook” contain forward-looking statements that are subject to change. Statements including words such as “anticipate”, “believe”, “estimate” or “expect” and statements in the future tense are forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual events or actual future results to differ materially from the expectations set forth in the forward-looking statements. Some of the factors which could cause the Company’s results to differ materially from its expectations include the following: timely development and release of Electronic Arts’ products; competition in the interactive entertainment industry; the Company’s ability to successfully implement its reorganization plans; the consumer demand for, and the availability of an adequate supply of console hardware units (including the Xbox 360(TM) video game and entertainment system, the PLAYSTATION(R)3 computer entertainment system and the Wii(TM)); consumer demand for software for legacy consoles, particularly the PlayStation 2; the Company’s ability to predict consumer preferences among competing hardware platforms; the financial impact of potential future acquisitions by EA, including the potential acquisition of Take-Two Interactive Software, Inc.; the Company’s ability to realize the anticipated benefits of its acquisition of VG Holding Corp.; consumer spending trends; the seasonal and cyclical nature of the interactive game segment; the Company’s ability to manage expenses during fiscal year 2009 and beyond; the Company’s ability to attract and retain key personnel; changes in the Company’s effective tax rates; the performance of strategic investments; adoption of new accounting regulations and standards; potential regulation of the Company’s products in key territories; developments in the law regarding protection of the Company’s products; fluctuations in foreign exchange rates; the Company’s ability to secure licenses to valuable entertainment properties on favorable terms; and other factors described in the Company’s Annual Report on Form 10-K for the year ended March 31, 2007 and Quarterly Report for the quarter ended December 31, 2007. These forward-looking statements speak only as of May 13, 2008. Electronic Arts assumes no obligation and does not intend to update these forward-looking statements, including those made under the heading “Business Outlook”. In addition, the preliminary financial results set forth in this release are estimates based on information currently available to Electronic Arts. While Electronic Arts believes these estimates are meaningful, they could differ from the actual amounts that Electronic Arts ultimately reports in its Annual Report on Form 10-K for the fiscal year ended March 31, 2008. Electronic Arts assumes no obligation and does not intend to update these estimates prior to filing its Form 10-K for the fiscal year ended March 31, 2008.

About Electronic Arts

Electronic Arts Inc. (EA), headquartered in Redwood City, California, is the world’s leading interactive entertainment software company. Founded in 1982, the Company develops, publishes, and distributes interactive software worldwide for video game systems, personal computers, cellular handsets and the Internet. Electronic Arts markets its products under four brand names: EA SPORTS(TM), EA(TM), EA SPORTS Freestyle(TM) and POGO(TM). In fiscal 2008, EA posted GAAP net revenue of $3.67 billion and had 27 titles that sold more than one million copies. EA’s homepage and online game site is www.ea.com. More information about EA’s products and full text of press releases can be found on the Internet at http://info.ea.com.

EA, EA SPORTS, EA SPORTS Freestyle, POGO, Boogie, Boom Blox, EA Playground, Smarty Pants Army of Two, Burnout and Pandemic are trademarks or registered trademarks of Electronic Arts Inc. in the U.S. and/or other countries. BioWare Corp. is a trademark or registered trademark of EA International (Studio and Publishing) Ltd. HASBRO, MONOPOLY, SCRABBLE, NERF, TONKA, YAHTZEE and LITTLEST PET SHOP are trademarks of Hasbro and are used with permission. (C)2008 Hasbro. All Rights Reserved. Half-Life is a trademark or registered trademark of Valve Corporation in the U.S. and/or other countries. Rock Band is a trademark of Harmonix Music Systems, Inc., a division of MTV Networks. “PlayStation” is a registered trademark of Sony Computer Entertainment Inc. Wii is a trademark of Nintendo. All other trademarks are the property of their respective owners.

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