Rare restructures, Microsoft warns of earnings slip

In 2002, Microsoft paid $375 million to buy Rare Ltd., developer of such Nintendo 64 hits as GoldenEye 007, Perfect Dark, and Banjo-Kazooie. However, sales of Rare's subsequent releases have failed to recoup its then-record-setting purchase price. Despite solid reviews, Perfect Dark Zero, Kameo: Elements of Power, Viva Pinata, Viva Pinata: Party Animals, and Banjo-Kazooie: Nuts & Bolts generated just over $66 million combined domestically over three years, according to the NPD Group.

Now, after shutting down internal studios FASA, ACES, and Ensemble, Microsoft has set its reorganizational sights on Rare. In a statement released to GameSpot, studio manager Mark Betteridge said the UK-based shop is undergoing a restructuring that could result in layoffs.

"As the entire industry struggles to address the increasing scale and cost of development, we too have felt a need to restructure our current approach so we can speed development and better manage the scale required to create high quality games," explained Betteridge.

Currently Rare has four unnamed projects in development, and Microsoft Game Studios reps did not say which--if any--would be affected by the changes. However, the reps did say that the publishing label "will be implementing a new approach to current projects in the pipeline" and that "a small number of current positions could be lost" at Rare as a result.

The Rare restructuring comes as Microsoft is grappling with wider issues related to the worldwide economic crisis. Just under a month after it announced that it was slashing 5,000 jobs due to falling profits, the software giant's CEO, Steve Ballmer, revealed that its sales will continue to slide.

"Revenues in our industry, and in our company, will be affected by the economic conditions," Ballmer told the Reuters news service yesterday.