EA laying off 6% of workforce

By Tor Thorsen, GameSpotPosted Oct 30, 2008 2:02 pm PT

[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.

255 Comments

  • Inconnux

    Posted Dec 10, 2008 10:16 pm PT

    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

    Posted Nov 18, 2008 6:08 am PT

    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

    Posted Nov 11, 2008 4:44 pm PT

    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

    Posted Nov 11, 2008 6:17 am PT

    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

    Posted Nov 7, 2008 8:56 am PT

    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

    Posted Nov 6, 2008 10:18 pm PT

    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

    Posted Nov 6, 2008 3:35 pm PT

    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

    Posted Nov 6, 2008 1:11 pm PT

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

  • Gwarpup

    Posted Nov 6, 2008 7:58 am PT

    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

    Posted Nov 4, 2008 6:12 am PT

    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.

  • brian_13un

    Posted Nov 3, 2008 10:44 pm PT

    EA keep it up

  • LindBergh2007

    Posted Nov 3, 2008 7:32 pm PT

    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

    Posted Nov 2, 2008 10:13 am PT

    @Nicholai69:Strange huh?

  • -Intellectual-

    Posted Nov 2, 2008 10:12 am PT

    how did madden sell 4.5 million copies ??

  • Nicholai69

    Posted Nov 2, 2008 4:16 am PT

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

  • Darkman2007

    Posted Nov 2, 2008 3:39 am PT

    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

    Posted Nov 2, 2008 3:06 am PT

    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

    Posted Nov 1, 2008 9:54 pm PT

    "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

    Posted Nov 1, 2008 6:10 pm PT

    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

    Posted Nov 1, 2008 6:06 pm PT

    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.

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