The talking points in Electronic Arts' latest release sound like chipper news. But they hide the fact that hundreds are out on the street today despite performing better than Wall Street estimates for the company. EDITOR'S NOTE: This story is evolving rapidly, stay tuned here for updates.
Among the quarter's highlights for Electronic Arts:
- EA is now the #1 Publisher Across All Platforms (which includes Console, PC, and Mobile)
- Electronic Arts has increased their share in some segments by four points.
- EA is selling more electronically, posting all-time record Digital Direct revenues
- Electronic Arts bought social gaming leader Playfish for an incredible $300 million
And here's the point you have to pay closer attention to:
- EA has a Cost-Reduction Plan to Cut $100 Million in Operating Expenses
To address this point, John Riccitello and Eric Brown had the following to say:
“EA is performing well, with quality, sales and segment share up so far this year,” said John Riccitiello, Chief Executive Officer. “We are making tough calls to cut cost in targeted areas and investing more in our biggest games and digital businesses.”
“We met our second quarter expectations and delivered a record quarter for revenue,” said Eric Brown, Chief Financial Officer. “Today we are announcing a significant cut in our operating expenses and the acquisition of a leader in social games, Playfish.”
Net revenue for the quarter was a record $1.147 billion, up 2 percent as compared with $1.126 billion for the prior year. Revenues were above street expectations. Sales were driven by the launches of FIFA 10, Madden NFL 10, The Beatles™: Rock Band®, Need for Speed™ SHIFT and NCAA Football 10. However, Electronic Arts still lost $391 million, a greater loss than a year ago of $310 million.
The cost reduction strategy confirms earlier rumors of job losses. It's now confirmed that layoffs at several divisions of EA have occured, including the team that put together Madden NFL 10 (Tiburon) as well as EA Studios Redwood Shores Quality Assurance Teams. EA Blackbox is also affected. Late breaking posts on Twitter seem to indicate that Mythic Entertainment is also laying off - up to 80 employees.
The layoffs come ahead of Electronic Art's earnings call, and according to rumors on Twitter (known EA employees), number in the hundreds.
Here are some quotes from Twitter - I have to stress here that I'm removing names where I can, because I understand that this is a delicate situation. Granted, these people are posting in a public forum, but I understand that layoffs can cause some fear...
- "EA Tiburon had layoffs today, no more of my friends were affected though."
- "Another round of layoffs at EA Black Box yesterday - my heart goes out to those who lost jobs."
- "Lots of friends from @EA getting laid off today. Not fun. #layoffssuck #bettertimesahead #EA #layoffs"
- "Who just got laid off: a. Me, b. Most of my department, c. HUGE chunks of EA, d. All of the Above."
And this is how the cost restructuring was announced:
EA has announced a plan to narrow its product portfolio to provide greater focus on titles with higher margin opportunities.
This action will result in the closure of several facilities and a headcount reduction of approximately 1,500 positions, of which 1,300 are included in a restructuring plan. The majority of these actions will be completed by March 31, 2010. This plan will result in annual cost savings of at least $100 million and restructuring charges of $130 to $150 million.
EA remains committed to delivering high quality games for consumers and leading the industry in the growing digital direct gaming sector.
The conference call is ongoing, I'll be reporting as the call continues. LIVE COVERAGE ON PAGE 2! -->
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