EA Executives to be Hauled Over Coals as Lying Claims Flare
Probst and Jenson in the dock, spotless run ends.
Electronic Arts, long time videogame darling of the financial sector, is about to be dragged across the coals in front of the Northern California Federal Court, with two key executives accused of purposefully misleading investors for personal gain.
The case, to be fronted by class-action sharks Schiffrin & Barroway, seeks class-action status for anyone who bought shares of EA between January 25, when the company posted fiscal third-quarter results, and March 21, when it warned of a profit shortfall for the financial fourth quarter of 2004.
Damagingly for EA, Chief Executive Larry Probst and Chief Financial Officer Warren Jenson are named as defendants following a conference call on January 25, in which it is claimed the two key executives made misleading projections about the company’s status. Shortly after this call, Probst and Jensen sold around $19 million worth of EA stock.
The suit also claims that other insiders sold almost $20 million of stock during the class period, when the price rose 15%. Then, on March 21, EA warned that its profit for the quarter ending in March would fall below its prior forecast by as much as 25 cents per share, with the firm blaming weak sales and shortages of PlayStation 2 and Xbox hardware. It was the first ever mid-quarter profit warning from the software giant.
The suit claims “…that the Company failed to disclose and misrepresented the following material adverse facts which were known to defendants or recklessly disregarded by them: (1) that increased competition from its competitors was eroding EA market share; (2) that hardware shortages were material; (3) that EA continued to suffer from operating margin compression; and (4) that as a result of the above, the Company's statements about its financial performance were lacking in any reasonable basis when made."
EA shares have tumbled by around 20% since the profit warning was issued.
"We cannot offer any specific information about the suit and we do not comment on pending litigation", is the official company line at time of going to press.
The case, to be fronted by class-action sharks Schiffrin & Barroway, seeks class-action status for anyone who bought shares of EA between January 25, when the company posted fiscal third-quarter results, and March 21, when it warned of a profit shortfall for the financial fourth quarter of 2004.
Damagingly for EA, Chief Executive Larry Probst and Chief Financial Officer Warren Jenson are named as defendants following a conference call on January 25, in which it is claimed the two key executives made misleading projections about the company’s status. Shortly after this call, Probst and Jensen sold around $19 million worth of EA stock.
The suit also claims that other insiders sold almost $20 million of stock during the class period, when the price rose 15%. Then, on March 21, EA warned that its profit for the quarter ending in March would fall below its prior forecast by as much as 25 cents per share, with the firm blaming weak sales and shortages of PlayStation 2 and Xbox hardware. It was the first ever mid-quarter profit warning from the software giant.
The suit claims “…that the Company failed to disclose and misrepresented the following material adverse facts which were known to defendants or recklessly disregarded by them: (1) that increased competition from its competitors was eroding EA market share; (2) that hardware shortages were material; (3) that EA continued to suffer from operating margin compression; and (4) that as a result of the above, the Company's statements about its financial performance were lacking in any reasonable basis when made."
EA shares have tumbled by around 20% since the profit warning was issued.
"We cannot offer any specific information about the suit and we do not comment on pending litigation", is the official company line at time of going to press.
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Comments
Joji 29 Mar 2005 18:58
1/4
Oh dear, first making employees work long periods of overtime with no pay and now this. How the mighty have fallen.
EA, you have to understand that making good original and satisfying games is what makes you more money.
While it doesnt always work this way you have less problems with shareholders (well I know how they hate risk in this game but without some risk you'll never bypass the competition and it's for this reason Konami's Pro Evo is kicking Fifa around the pitch).
Perhaps EA needs to be smaller like once before, when you have less employees you can keep an eye on what they are up to.
EA, you have to understand that making good original and satisfying games is what makes you more money.
While it doesnt always work this way you have less problems with shareholders (well I know how they hate risk in this game but without some risk you'll never bypass the competition and it's for this reason Konami's Pro Evo is kicking Fifa around the pitch).
Perhaps EA needs to be smaller like once before, when you have less employees you can keep an eye on what they are up to.
SPInGSPOnG 30 Mar 2005 12:36
2/4
That's would seem to be a clear case of market manipulation for personal gain. They should burn in hell with Martha Stewart and Jamie Oliver.
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Ditto 30 Mar 2005 14:47
3/4
I was slightly amused to see Mr Oliver on ITV News today talking about how he has, through the power of good, forced the government to pledge more cash to school meals.
EA is a funny beast. They used to just make loads and loads of money with seemingly no limits, but now they've began to hit setbacks.
The Company needs to learn that employees will work better when they're happy, that it's possible to make money while innovating (look at Nintendo) and that customers don't want seemly endless generations of average sports titles.
EA is a funny beast. They used to just make loads and loads of money with seemingly no limits, but now they've began to hit setbacks.
The Company needs to learn that employees will work better when they're happy, that it's possible to make money while innovating (look at Nintendo) and that customers don't want seemly endless generations of average sports titles.
DoctorDee 30 Mar 2005 17:21
4/4
Adam M wrote:
It's his contant whining that f**ks me off. Driving around in a Maserati (A car that basically says, "I have £80,000 to burn" because the re-sale value of it is ZERO) and complaining that he "isn't getting paid for this". Sorry, but I simply do not believe that he is doing "School Dinners" for free.
Then whining about not being home by eight o'clock. He runs a f**king restaurant for god's sake, he should NEVER be at home by eight pm.
I know he's just trying to seem like a man of the people, with real-world problems. But he should realise that he's not, and get on with other otherwise stirling work "School Dinners" is doing.
Then whining about not being home by eight o'clock. He runs a f**king restaurant for god's sake, he should NEVER be at home by eight pm.
I know he's just trying to seem like a man of the people, with real-world problems. But he should realise that he's not, and get on with other otherwise stirling work "School Dinners" is doing.