Coming off of multiyear lows, shares of Electronic Arts Inc. jumped Wednesday after the video game publisher posted weak third-quarter results but outlined a slew of cost-cutting measures aimed at boosting profitability.
The Redwood City-based company's chief executive, John Riccitiello acknowledged that the dismal economy was only in part to blame for the results. It was the company's own performance - games that did not live up to expectations - that is hurting profit and sales.
UBS analyst Benjamin Schachter said the video game industry "remains a bright spot in the economy," and he thinks EA's management has a good chance of turning its business around.
Still, the analyst, who rates EA "Neutral," said he would need to "gain confidence" in the turnaround before recommending that investors buy the stock at its current levels.
EA is cutting 1,100 jobs, or 11 percent of its work force, closing studios and scaling back its product portfolio to focus on hit games. It is also working on developing more good games for the wildly popular Nintendo Wii, something it has been criticized for not doing enough. And it delayed the release of three games and said it will step up its marketing campaign.
Colin Sebastian, an analyst with Lazard Capital Markets, also kept a "Hold" rating on EA, saying while he expects long-term revenue and profit growth for the company as one of the world's top video game publishers, its shares will likely stay in their current range because of pricing concerns, a disappointing margin outlook and recent issues over how the company executes its business plans.
Shares rose nearly 12 percent, to $17.27 in trading Wednesday. On Tuesday, the stock hit $14.24, its lowest since 2000, before recovering and closing up more than 4 percent.