Publisher of Video Games to Cut Jobs
Electronic Arts Inc., the world’s largest independent video game publisher, said Wednesday that it was laying off 5% of its workforce, or nearly 350 employees, amid slumping sales.
The Redwood City, Calif.-based company, which employs nearly 7,000 people, is scheduled to release its fiscal third-quarter results today.
EA warned investors in late December that it might fail to meet its earnings guidance for the quarter, citing lower-than-expected sales of Microsoft’s Xbox 360 consoles as one factor.
The job cuts will occur at the company’s offices in Northern California; Orlando, Fla.; and Vancouver, Canada.
Employees were notified of the cuts Wednesday, said company spokeswoman Trudy Muller. She said there would be no layoffs at EA’s offices in Playa Vista.
Michael Pachter, an analyst with Wedbush Morgan Securities in Los Angeles, said it appeared the company was trying to find the correct staffing level to match its revenue.
“The cost structure is a little out of whack,” Pachter said. “They clearly expanded their development capability the last three years trying to gear up for the next generation” of video game consoles.
The layoffs come as the $10.5-billion U.S. video game industry transitions to a new round of consoles this year from Microsoft Corp., Sony Corp. and Nintendo Co. This has created a lull in sales as potential buyers wait for new game machines to hit the shelves.
Microsoft’s new video game console, the Xbox 360, has been in short supply since its launch in November. Sony and Nintendo are expected to release their consoles, the PlayStation 3 and the Revolution, later this year.
Muller said that the scarcity of Xbox 360s hasn’t helped her company, but it was not to blame for the layoffs.
“We’d do this regardless of how that system launched,” she said. “However, hardware scarcity does make the transition [to new game consoles] difficult.”
Muller said EA was in the process of realigning its workforce to develop games for the new game consoles and to expand markets around the globe.
The company also is looking to develop new games that can be played over cellular phones. In December, EA announced it would pay $680 million to acquire Palm-based Jamdat Mobile Inc.
“This is part of an overall industrywide console transition move that we make,” Muller said.
Word of the layoffs came after the market close Wednesday. Earlier, shares of Electronic Arts rose 18 cents, to $54.76. Shares have added 4.7% this year but are down from more than $70 about a year ago.
