Electronic Arts 2000 Annual Report Download - page 5

EA 2000 AR
03
CHAIRMAN’S LETTER
dented arrangement, which provides EA with immediate
access to nearly 60 million online consumers including 22
million AOL subscribers. We have created a separate class of
stock, Class B Common Stock (Tracking Stock), to track the
performance of the EA.com business, and plan to take this
security public at a later date. AOL owns 10 percent of the
Class B Common Stock with a warrant for an additional 5 per-
cent ownership. News Corp., as partial consideration for the
sale of their Kesmai development group to EA, received 5
percent of the tracking stock. We believe that the partnership
with AOL, News Corp., EA Studios and our existing publishing
organization is a formidable combination that will facilitate mar-
ket leadership in this rapidly growing segment of the Internet.
STRATEGIC GOALS FOR THE FUTURE As we look ahead, we
are focused on four strategic initiatives.
First, our goal is to be the market leader on the next
generation of video game consoles, which includes Sony’s
PlayStation®2 computer entertainment system, Microsoft’s
Xbox™ ,and Nintendo’s Dolphin. We shipped our first product
for the PlayStation 2 console in Japan in May 2000. Additional
titles will be released beginning in the Fall of 2000 in con-
junction with the launch of the PlayStation 2 console in North
America and Europe.
Second, our objective is to be the leading publisher world-
wide on the PC platform. We currently hold that position in
Europe and Asia Pacific and intend to increase our share in
fiscal year 2001. In North America, we believe we can move
into the leadership position with a strong portfolio of titles
that includes The Sims, Command & Conquer: Red Alert™2,
American McGee’s Alice™
,Black & White™ ,The World Is Not
Enough,
and a full line up of EA SPORTS products.
Third, we intend to be the leading provider of interactive
entertainment on the Internet. The ability to create compelling
content in our Studios and our new EA.com division, along
with the unparalleled distribution and reach provided through
our partnership with AOL, uniquely positions us for success in
this environment. We plan to launch the EA.comSM site in sum-
mer 2000, with the full service operational in calendar 2001.
Fourth, but most importantly, we strive to be the No. 1
“people company” in the entertainment industry. Without
doubt, our employees are the lifeblood of our company. They
create the award-winning products, market and distribute
them more effectively than any competitor, and provide the
support functions that enable EA to be the premier company
in our industry. It is imperative that our people are well
trained, strongly motivated, recognized for their accom-
plishments and highly productive. We take this challenge
seriously and are constantly working to enhance the quality
of our organization.
We have every confidence that we can achieve each of
these strategic objectives, and, in doing so, that we will con-
tinue to grow and prosper not only during the current console
transition period but also in the years ahead.
I would like to acknowledge our employees for their tire-
less efforts, commitment to excellence and dedication to
making EA the worldwide leader in our industry.
Finally, I thank our customers and stockholders for their
continuing support and trust in Electronic Arts.
Sincerely,
Lawrence F. Probst III
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
1. EA.COM, A DIVISION OF ELECTRONIC ARTS INC. (“ELECTRONIC ARTS”) REPRESENTS ELECTRONIC
ARTS’ ONLINE AND E-COMMERCE BUSINESS. THE STATEMENT OF INCOME INCLUDES ALL REVENUES
AND COSTS DIRECTLY AND INDIRECTLY ATTRIBUTABLE TO EA.COM, INCLUDING CHARGES FOR
SHARED FACILITIES, FUNCTIONS AND SERVICES USED BY EA.COM AND PROVIDED BY ELECTRONIC
ARTS. CERTAIN COSTS AND EXPENSES HAVE BEEN ALLOCATED BASED ON MANAGEMENT’S ESTIMATES
OF THE COST OF SERVICES PROVIDED TO EA.COM BY ELECTRONIC ARTS.
2. PRO-FORMA CONSOLIDATED NET INCOME AND EARNINGS PER SHARE EXCLUDE PRE-TAX GOODWILL
AMORTIZATION EXPENSE OF $12 MILLION AND $6MILLION IN THE YEARS ENDED MARCH 31, 2000
AND 1999, RESPECTIVELY, AND $7MILLION AND $44 MILLION RELATED TO ONE-TIME ACQUISITION
RELATED CHARGES.
3. PRO-FORMA NET REVENUES FOR THE CORE BUSINESS INCLUDE INTERCOMPANY REVENUES FROM EA.COM.
4. PRO-FORMA CORE NET INCOME EXCLUDES THE OPERATIONS OF EA.COM, AND EXCLUDES PRE-TAX
GOODWILL AMORTIZATION EXPENSE OF $11 MILLION AND $6MILLION IN THE YEARS ENDED MARCH
31, 2000 AND 1999, RESPECTIVELY, AND $3MILLION AND $44 MILLION RELATED TO ONE-TIME
ACQUISITION RELATED CHARGES.
5. SOURCE: IDC/LINK
6. EA.COM PRO-FORMA NET LOSS EXCLUDES PRE-TAX GOODWILL AMORTIZATION EXPENSE OF $1MIL-
LION IN THE YEAR ENDED MARCH 31, 2000 AND $4MILLION RELATED TO ONE-TIME ACQUISITION
RELATED CHARGES.
This Annual Report, including the Letter to Stockholders at pages 1 to 3, contains forward-looking statements about circumstances that have not yet occurred.
All statements, trend analysis and other information related to markets, our products and trends in revenue, as well as other statements including such words
as “anticipate”, believe” or “expect” and statements in the future tense are forward-looking statements. These forward-looking statements are subject to busi-
ness and economic risks and actual events or our actual future results could differ materially from those set forth in the forward-looking statements due to such
risks and uncertainties. We will not necessarily update information if any forward-looking statement later turns out to be inaccurate. Risks and uncertainties
that may affect our future results and performance include, but are not limited to those listed under the heading “Risk Factors” at page 32 of this Annual Report
and under the same heading in our Annual report on Form 10-K for the year ended March 31, 2000.