EA laying off 6% of workforce

[UPDATE 2] Despite 40% jump in quarterly revenue, losses lead megapublisher to pink-slip more than 500 employees; Madden sells 4.5 million, Spore 2 million; Warhammer subscribers hit 800,000.

It's been a rough year for Electronic Arts. Last Halloween, the Redwood City, California-based publisher had a share price of $61.12 and was riding high on the acquisition of superdeveloper BioWare/Pandemic. Today, the company's stock ended at $27.73, after a steady decline accelerated by the past month's economic bloodbath on Wall Street.

Unfortunately for many EA employees, 2008 is about to get a whole lot rougher. Today, Electronic Arts announced that it is laying off six percent of its global workforce as part of a company-wide cost-reduction plan. With a payroll of about 9,000 worldwide, the layoffs will affect approximately 540 people. In a conference call this afternoon, executives said the layoffs will come from EA's publishing and corporate divisions, as well as from its various studios and labels.

Today's battery of pink slips may not be the last. Executives also said that EA "will manage head-count decisions aggressively going forward." The company plans to reduce hiring in high-cost territories, and will expand operations in "lower-cost locations."

By EA's own estimates, the layoffs announced today will save it more than $50 million annually--money the company sorely needs. Today, EA announced a greater-than-expected $310 million loss, or 97 cents per share, during the July-September quarter. During the same period last year, the company lost $195 million, or 62 cents a share.

The loss is doubly harsh because it comes in the face of a 40 percent surge in quarterly revenue for EA. For the quarter, the second in the company's fiscal year, earnings totaled $894 million, up $254 million from the same quarter in the prior year. Best-sellers for the period include Madden NFL 09, with 4.5 million copies sold worldwide, and Spore, with 2 million units sold worldwide. Another high point was the launch of Warhammer Online: Age of Reckoning, which now boasts 800,000 players on 1.2 million units sold. NCAA Football 09 sold 1.8 million copies, and Tiger Woods PGA Tour 09 sold 1.9 million--the same number as Mercenaries 2: World in Flames. Combined, Rock Band and Rock Band 2 moved 1.5 million units during the quarter.

In a statement, EA CEO John Riccitiello put a brave face on things. "Considering the slow down at retail we've seen in October, we are cautious in the short term," he said. "Longer term, we are very bullish on the game sector overall and on EA in particular. The industry is growing double-digits on the strength of three new game consoles and increases in the number of homes with broadband Internet connections. EA is well-positioned to benefit from these technology drivers due to the strength of our creative studios and our broad collection of game properties."

Unfortunately, the markets were not as upbeat as Riccitiello. As of press time, EA stock was down nearly 14 percent in after-hours trading.

[UPDATE] In the conference call, Riccitiello and other executives laid out the reasons for the major shortfall. One major factor was the postponement of Harry Potter and the Half-Blood Prince, which was slated for a late summer release to lead up to its film tie-in's November debut. When that film was suddenly delayed until summer 2009, EA was forced to sit on a nearly finished game it had already spent million marketing. As a result, EA had to move $120 million of revenue into its next fiscal year. Of that, roughly $48 million was expected in the July-September quarter, when the game was slated for release.

[UPDATE 2] Besides international exchange rate issues, which cost EA 12 cents a share, the other big reason for the shortfall is EA's lavish investment in future ventures. The company spent over $100 million in expanded development costs, and invested a further $150 million in building a direct-to-consumer download business. The company also spent $35 million in upfront expenses for its EA Partners deals. Those include the recent publishing agreements with Epic Games, id Software, and Grasshopper Manufacture, as well as the just-announced agreement to distribute MTV and Harmonix's rhythm game based on the music of The Beatles.

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Discussion

254 comments
Inconnux
Inconnux

Perhaps they should let go of their 'securom' division... Spore would have had alot more sales if they did. Sorry EA as long as you treat your customers like criminals, you won't get any sales from me.

Sephiroth36
Sephiroth36

Lets just say that we never know what is happening behind the scenes and what they are "really" saying all those corporate dudes. It is typical for some companies that money is important and quality is last, if the money comes, who cares about the rest. Is their own fault the company is going down, bad management, bad resources, bad management on money. It is rare to see now good quality games from the, developed or published, who knows why some companies still get them as a publisher when now we know they push any developer to rush it, less money, and do like the Sims or what now will become of Spore, another Sims mayhem, tons of expansions, and even it seems to fix things and for those who have bad management in time the costumers have to pay for their mistake. I have mixed emotions about what is going on, im glad that is happening but at the same time i hate to see anyone to loose their jobs. Still is their own fault, if they started something good, keep with it, make the effort, but they lost it and now the employees have to pay too. And now how the world is going in to a "bankrupt" state or going to... everyone have to watch out, the s***t will hit the fan. Mostly to have 8 eyes wide open.

indigoAK200
indigoAK200

siiixon: Wishing any corporation to fall apart for such reasons is completely asinine. I think what you fail to realize here is that Electronic Arts is providing a paycheck to over 9,000 people - people that depend on that paycheck to feed their families and pay the bills. The company goes down and so do their jobs - and if you haven't noticed it's becoming increasingly difficult to find another right now which is why the unemployment rates are skyrocketing.

siiixon
siiixon

i would be glad to see this type of monster corporations fall apart, so we can go back to small studios developing quality games. i hope one day EA will be gone, better sooner then later if you ask me ! samir192 are you kidding me ? the quality of games where never so low then in the last 2 years, and i'm not talking grafix quality, but over all Darkman2007: that's very true too, i decided after 2142 that i wont buy any EA game that is so restrictive with accounts and copy protection, they wont do anything for copy protection anyhow they just annoyance... i sure wont buy an EA game like that , its just not wort the trouble, untill they do that to us i just get them "free"

jknight5422
jknight5422

Gee, who couldn't see that this was going to happen? They spent all their money reserves gobbling up companies & now they have no money & the economy collapses. Growing fast & large as EA did pretty much guarantees it's going to fall flat on its face. Every company that grows too fast, acting like Pacman, has the same problems. They'll probably never be able to make a profit going forward.

Pilch_R_eD
Pilch_R_eD

You cant only accuse EA of laying off workers atm. During this entire economic meltdown companies everywhere are laying off workers to be able to keep going. Allot of companies have gone completely under with all the workers there being out of work. If some of these companies didnt fire people to save money, the entire company might go down and then all people who where working at that company would be out of work. Im not happy its happening. Sadly at the moment this is just the way things are. Whether its fair that some of these Companies are doing this, or whether they could easilly afford to keep them on is speculation really.

styymy
styymy

How about actually releasing top tier games in the 1st and 2nd quarters in the year instead waiting till the 4th quarter? In the past few years the big game companies would release a top tier title in Jan or Feb, then nothing until November? Maybe scheduling earlier releases would help.

samir192
samir192

Thats a shame. They have been producing top quality games recently; they deserve more really.

Gwarpup
Gwarpup

Theres no way those Warhammer figures are correct. Im quite sure they dont have 800,000 subs. Ive been playing, well now cancelled. And it was just too big of a world to handle the low numbers of players. And with its terrible chat system, there wasnt an easy way to communicate to ralley other players to any openworld RVR.. thus half the zones are empty on all servers. People just queue for Scenarios, and play it like it counterstrike, but with a monthly fee.

Delston
Delston

A company's got to react to the market, it's unfortunate for the employees, but the company's first allegiance is to the shareholders. If the management deems they have too large a workforce, then they're obligated to react accordingly. Not everything in life is fair. When you're an employee, you accept from the get go that your employment is NOT guaranteed. PS. Dead Space rules! EA keep up the good work.

LindBergh2007
LindBergh2007

The bottom is now officially falling out for EA. This is something I've been predicting all year, EA's downfall marks the begining of the U.S. software market's crash it's already begun to collapse as more and developers shut down, major publishers layoff employees, and the failing economy takes a bite of out of the tech market and consumer's spend less on electronics. If other western publishers follow suit(which, I see as very likely) I would be concerned about a possible gaming crash and 2009 possibly being a year with the fewest game releases in 25 years. Not saying I hate EA. But you can't deny that the bottom is falling out on them.

tudyniuz
tudyniuz

@Nicholai69:Strange huh?

Nicholai69
Nicholai69

Christ, madden NFL beat spore over sales??? :? lol

Darkman2007
Darkman2007

i reckon its because of the securom DRM issue, at least partly, alot of people are boycotting EA's games cause of it, i cant blame them.

drivemuse
drivemuse

To: Ardiendo_1. Of course not, it was said with tongue in cheek. Why does everyone feel the need to take everyone elses comments on with such passion and ferocity? It's a comment box...for comments, not arguments. Relax people.

Richard7666
Richard7666

"UPDATE] In the conference call, Riccitiello and other executives laid out the reasons for the major shortfall. One major factor was the postponement of Harry Potter and the Half-Blood Prince, " Oh my God...a major cause of this was the DELAYING of a MOVIE TIE-IN GAME? Please excuse me while I throw away the rest of my faith in humanity.

godzillavskong
godzillavskong

I really don't hate EA. I actually like a lot of their games.Battlefield Bad Co and NCAA Football 09 are two of my current favorite titles. I also liked Dead Space.I just am a little ill at how big companies react to profit %s being down to previous years.

godzillavskong
godzillavskong

This is what is really sad in todays world.I know its part of how business is ran, but it just seems like when a company doesn't hit that %20 profit margin, and lets say they only get to %18, now lets layoff some employees to keep the revenue in line.How about making a lot of extra incentives for these overly paid CEOs and Regional Directors instead of laying off the hardworking middleman.We know the economy is in bad shape, so how about realizing that your profits may not be as strong as the previous years.I know stockholders don't want to hear that, but its the truth and its sad to see them adding to the unemployment percentage.

IrishMadness
IrishMadness

Mirror's Edge was really good I like EA yes I am sorry for the workers but why hate them you don't even work there.

spike6958
spike6958

How can a company that seems to want to own EVERY video game company in exsistance, and is buying companys left,right and center say they need to cut there workforce? surely they could just move them to other companys that need them. Also why are they saying they lost money from Potter been delayed, its not costing them any extra money it's just sat on there computers doing nothing, and they'll make just as much money when it's released next year as it would have this year, it's a profit delay not a profit loss, EA is just getting WAY too greedy!

pipegrep
pipegrep

Stop ending thoughts and comments with '...'. Use punctuation and paragraphs. So hard to read something that is a big block of garbage. sheesh

prioritymail
prioritymail

What the hell! They are too busy buying up smaller companies to worry about keeping enough money to pay the workers?

Ardiendo_1
Ardiendo_1

The image attatched to this article on the GS main page is pretty tasteless. And drivemuse do you really think the people who have lost their jobs actually decide what games to make themselves? They do what they are told in order to make an honest living.

Paladin_King
Paladin_King

My God tudyniuz, that was an informed post. Get off the bandwagon. Jivemaster: EA has ALWAYS been complete and utter trash? ALWAYS...really? So they've never made great games since their inception? You sure about that? You can make the argument that their best games are not in-house developed..but so what? That's the nature of business. Big companies buy/sign contracts with little companies to boost their rep. Otherwise, why not attack 2K for putting out bioshock under their name? Also, Dead Space was not a complete fluke. I really think EA is actively trying to pursue a new philosophy of allowing creativity and encouraging fresh new IPs. The Dead Space devs said that not once did EA ask them to tone it down, and they were emphasized to go wherever they wanted to go. That's great and shows EA is going to, hopefully, beat its rep eventually. To all of you saying "I hate EA," remember that business acquisitions are...well business..and video games are business. That said, look at all the great games published by EA this year: Crysis Warhead, Spore, Mercenaries 2, Mirror's Edge, Dead Space, Red Alert 3, Left 4 Dead. Heck, I'm probably missing a few. I guess Burnout Paradise as well, since it continues to be supported.

aaronobst
aaronobst

WTF does everyone have against EA? specifics anyone?

drivemuse
drivemuse

As long as they only lay off the ones responsible for their terrible games.

jivemaster
jivemaster

Pfff... Need for Speed is garbage, and Dead Space was a fluke for EA. EA has always been complete and utter trash. It relies solely on licenses to sports and movies to get it through, and the rest are either a rehash of a rehash or a one-off original release from a team they've purchased in the last 12 months. These sometimes interesting one-off games never usually get a repeat, because these people are the first to get fired to save money. It's their cunning acquisitions and business strategies that keep them on top - not their trashy games. Their games are certainly not good enough for you to stand there and abuse other forum members over.

curiously_sly
curiously_sly

[This message was deleted at the request of a moderator or administrator]

curiously_sly
curiously_sly

ah (youngsexynerd) if you dont like their gamedont but it then dumb ass

Pilch_R_eD
Pilch_R_eD

The same old same old repeating over and over again. Can someone say "I dont like EA" any louder? My only question is how rational and logically thought out is this hatred? EA made alot of bad descisions in the past under old management, leading to a slew of bad games and bought out companies that went under. But that was a LONG time ago now, and if anyone can't see how much they have been turning that around in the past 2 years then you are very ignorant. Im not saying I love EA, they're a company, i currently feel indifferant to them. But they have been doing allot of good work, allot of good deals, giving their people space to do their work, and according to Epic, Id and others, they have been a great supporting company with their new EA partners program. If you hate this company for being a money making machine, than you are a fool. Look at how much love most everyone has for Microsoft. Who do you think makes more money out of those two? And in this latest console war, MS has played an incredibly low and dirty game, using their big money to push out the competition. EA is just a drop in the bucket like all the other big corporations. They have shareholders to please. The fatcats who sit back and watch their money incubate and grow. And if the shareholders and happy with their investment, then companies like EA loose their funding. Isnt it time to stop fighting so blindly against something you probably dont even have any real unique problems against?

Licurgo
Licurgo

I guess this is what happens when big companies buy everybody else... I believe Valve (and any "good" company) doesn't lay off people and search for cheap labor overseas.

Partisan357
Partisan357

How about we just lay off Mike Riccitello.

youngsexynerd
youngsexynerd

well maybe small video game studios can actually start making their own games once again without EA trying to take over them an we can have original games once again, EA games shouldnt even be called video games its more like video lames, sooo burn to the ground EA, i hate u.

ctburesch
ctburesch

rock_solid, I think what he meant is that they did have their name on the game case and they were responsible for it hitting the shelves. Also I think Burnout Paradise City was the best Burnout yet. The free upgraded content helps as well.

ctburesch
ctburesch

PS dRuGGeRnaUt, I enjoy EA games, I am not bashing them. maybe you need to go to school and learn to read.

ctburesch
ctburesch

dRuGGeRnaUt, I am a pro college boy that would fit into Barack Obama's tax plan...I have an executive position at a very large corporation, one that you probably use daily. Silly...

rock_solid
rock_solid

@Black_Tribi you confuse developing with publishing. EA didn't have s*** to do with developing Crysis.

ecs33
ecs33

@ Gaara79: So are you scolding those who did make a profit? Yes there are starving people in the world and people who cannot pay their bills. But businesses go into business for one sole reason among others - to make a profit. If companies that are making a profit are forced to give their money to those less fortunate then what is the point of going into business in the first place? Where is that incentive?

ecs33
ecs33

I love how people are saying that if they cut costs to the CEO then that would save the company. Have you all looked at the balance sheets? Executive salaries are around a million per year. Operating costs alone exceeded 3 billion. To say that cutting a CEO's salary would save the company is the dumbest thing I have ever heard. I hear so many people say this. Cutting a CEO's salary would have an almost unnoticeable effect on the cost side of the business.

dRuGGeRnaUt
dRuGGeRnaUt

[This message was deleted at the request of a moderator or administrator]

Gaara79
Gaara79

I'm sorry if I'm having a hard time drinking the financial crisis cool aid when there are companies that make hundreds of millions of Euros in profit, and companies that make more profit than they did last year, who still complain about not making enough money. Meanwhile people who pay for health insurance cant afford to pay their medical bills. If you're a company that makes a profit on a yearly basis, you have nothing to complain about, period. Of course there is nothing in this article about EA's annual numbers, but I'm talking in general.

pipegrep
pipegrep

Fact of the matter is that this company is too big for their own good and they blow lots of money on dumb s**t. Million bucks on marketing Harry Potter?!? HARRY POTTER!!!! Who makes that kind of a decision? Most games based on movies suck anyway. $120M in revenue from a Harry Potter video game? Come on. You wish. That's a real generous guess there mister businessman. Find your niche and stick to it and stop making games based on movies.

keno004
keno004

I hope EA falls further get served EA get served

TalonComics
TalonComics

This is the price EA is going to pay over and over for trying to be *the* video game corporation. Hopefully we'll see the return of small studios publishing again.

Hugomanen
Hugomanen

Considering the average market drop to be approx 35% 6% of the employees is a fraction of what could be justified. @black_tripi: especially burnout is a good example of what i call the EA syndrome. You take a great game, improve it slightly, and then just spew out new ones at an insane rate. In the end leaving you not caring whether or not a new game in the franchise has arrived because the last two was practically patch tweaks. Thats at least the impression im left with. No doubt EA produces a couble of good games, but you cant say they are great because some of the companies they bought still makes good games. (besides, spore got screwed up good with the practically complete lack of gameplay)

duffmanth
duffmanth

It seems to me that EA has too many things on the go all at once. Maybe they should stop trying to buy other game companies and start fixing some of their once mighty game franchises like Need for Speed and MVP Baseball that they've driven into the crapper!!

fredwv
fredwv

canceled my warhammer account... back to wow for WOTLK. Trust me, I'm not the only one.