Electronic Arts Hit With More Layoffs
Electronic Arts (EA), once the videogame industry's biggest independent publisher, has laid off hundreds of employees as it continues to struggle.
EA confirmed the layoffs Thursday in its corporate blog, but declined to put a number on how many employees were affected. Sources within the company say the cutbacks were significant, though were lower than some media reports, which placed the number at 1,000 or higher.
"In recent weeks, EA has aligned all elements of its organizational structure behind priorities in new technologies and mobile," the company said. "This has led to some difficult decisions to reduce the workforce in some locations. ... These are hard but essential changes as we focus on delivering great games and showing players around the world why to spend their time with us."
(EA is in its pre-earnings quiet period, which limits the information it can release to the public, which is part of the reason it declined to give specifics.)
The staff cuts Thursday were the latest in a string of corporate belt-tightening moves that have been going on for much of April. The "hundreds" number, people in the know tell CNBC.com, is cumulative, including not only the most recent round of layoffs, but others this month as well.
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In mid-April, the company seemingly shut down Playfish, the social gaming division it purchased in 2009 for $300 million, canceling all of the unit's active titles. Around the same time, layoffs were announced at EA Mobile in Montreal.
At least two EA studios were shut down with Thursday's cutbacks. Employees at
Officials noted, however, that two of the biggest upcoming games from that division – an as-yet untitled game from Respawn Entertainment (founded by the creators of Activision's (ATVI) "Call of Duty" franchise) and "Fuse" from Insomniac Games – continue to move forward.
"In recent weeks, the executive team has been tasked with evaluating every area of our business to establish a clear set of priorities, and a more efficient organizational structure," wrote Larry Probst, EA's acting CEO in an internal memo to staffers.
"This process has led to some difficult decisions about the number of people and locations needed to achieve our goals. The workforce reductions which we communicated in the last two weeks represent the majority of our planned personnel actions. We are extremely grateful for the contributions made by each of these individuals – they will be missed by their colleagues and friends at EA."
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The April staff cuts are the second round of cost cutting to occur this year at EA. In February, the publisher cut jobs at several console game-focused studios in several cities.
"This week we let some people go in Los Angeles, Montreal as well as in some smaller locations," Frank Gibeau, president of EA Labels, said in a blog post announcing those cuts. "Console transitions are a complex and challenging experience."
Staff reductions are just part of the bad news EA has had to report in 2013.
CEO John Riccitiello announced his resignation in March alongside a warning that the company would report weaker-than-expected results for its fiscal fourth quarter. (The company will report those earnings on May 7.)
EA was also named the "Worst Company in America" by consumer watchdog website The Consumerist for the second year in a row earlier this month.
Despite the cutbacks, resignations and PR problems, investors have been fairly positive on EA since the beginning of the year. The stock is up 23 percent year to date. Analysts still view the stock as a "show me" story, though – as the company has made lofty promises, but failed to live up to them in recent years.
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Of analysts covering EA, four list it as a strong buy and 5 have it as a buy. 17, however, have a hold on the stock, waiting for the company to pull out of its slump. Only two list it as a sell.
Analysts have noted for some time that EA's failure to execute on its financial goals was reason for concern. And as development costs rise for games on next generation systems, the company is apparently looking to take a more defensive position.
"EA faces a number of crucial decision points regarding resource allocation and franchise planning in the hit-driven video game business," said Baird Equity Research's Colin Sebastian in a note to investors.
Sebastian is neutral on EA.