Electronic Arts to cut Jobs

[Infiniti]

Electronic Arts posts larger loss, cuts jobs (AP)
Posted on Thu Oct 30, 2008 6:37PM EDT

NEW YORK - Video game publisher Electronic Arts Inc., whose titles include "Rock Band," posted a wider quarterly net loss Thursday and said it is laying off about 6 percent of its work force to cut costs as it heads into the most lucrative season for the games industry.

Higher development and marketing costs led to the bigger loss for the July-September period. The quarter's revenue surpassed Wall Street's forecast thanks to the success of games like "Spore" and "Madden NFL 09," but the company did not exude the cheery optimism that has characterized the video game industry in the past few months even amid the economic turmoil. The company's shares, which have been trading at their lowest level more than five years, tumbled in after-hours trading.

"Considering the slowdown at retail we've seen in October, we are cautious in the short term," said John Riccitiello, chief executive, in a statement. "Longer term, we are very bullish on the game sector overall and on EA in particular."

The company lost $310 million, or 97 cents per share, in the quarter, the second in its fiscal year. That was worse than the loss of $195 million, or 62 cents per share, a year earlier.

Sales jumped 40 percent to $894 million.

Excluding one-time items, EA says it lost 6 cents a share in the latest quarter, matching the expectation of analysts polled by Thomson Reuters.

Adjusted sales, which exclude deferred revenue for some online games, were $1.13 billion, beating expectations for $1.08 billion.

Chief Financial Officer Eric Brown said the company remains "cautiously optimistic" about the holidays. EA, like other video game companies, makes the bulk of its money in November and December.

"We have heard that retailer foot traffic is down in general, which is a negative," he said in an interview. "But we also know that retailers are increasing their shelf space (for video games ahead of the holidays)."

EA lowered its full-year profit outlook range because of the strengthening dollar and the delay of the latest "Harry Potter" game, though it kept its revenue forecast intact. The company expects to earn between $1 and $1.40 during the fiscal year, excluding items, down from its previous forecast of $1.30 to $1.70 in adjusted earnings. On this basis, analysts are predicting a profit of $1.42 for the year.

The job cuts will amount to between 500 to 600 positions across all functions and locations, EA said. While some of these jobs are open, most will involve layoffs. The company said it expects about $50 million in annual pretax cost savings as a result.

Shares of the Redwood City, Calif.-based company sank $4.03, or 14.5 percent, to $23.70 in after-hours trading. The stock had closed down 31 cents at $27.73.

 

[DHMagicMan_1]

Is Mythic a subsidiary of EA or it's own company?

No lay offs at Mythic I hope?

My company's had two rounds of lay offs in the last year... it really sucks.

 

[Dermott of LS]

...

It's not just EA. Just in the past week and a half or so, quite a few people at my company have been laid off and EVERYONE is nervous right now... and up to the past couple of months, our year has been one of the heaviest yet.

I work in the collectibles market at one of the premiere authentication services, so our standpoint in the economy is not all that different than a company like EA... entertainment (though ours also moves into the "investment" side as well, but mainly entertainment).

The Market right now is VERY unstable with the credit mess and the uncertainty of the upcoming election.

Hopefully it will not harm either UO or my job... or I'm REALLY in trouble.

 

[RoycroftLS]

It's important to note that they didn't say specifically where the job cuts were coming from, and that leaves two trains of thought:

1) If you choose to believe the claim UO is "wildly profitable", and as such a steady (albeit relatively small) source of income, then it would seem to be just the kind of game EA would want to keep around in times of financial turmoil.

2) If you choose to believe that EA has wanted to get rid of UO in the past (as Jacobs has claimed), then an economic downturn gives the executives a justifiable reason for pulling the plug on UO. Even if UO is profitable, it doesn't have the potential to pull in the big bucks like a new release (i.e. not profitable enough), and might not be worth the headache of keeping around.

 

[Maplestone]

*sympathies and best wishes to devs, admins, captains and crew ... as well as everyone in the community struggling with these uncertain times*

 

[Viquire]

It's important to note that they didn't say specifically where the job cuts were coming from, and that leaves two trains of thought:

There is regularly room for more than two trains of thought

1) If you choose to believe the claim UO is "wildly profitable", and as such a steady (albeit relatively small) source of income, then it would seem to be just the kind of game EA would want to keep around in times of financial turmoil.

THIS makes sense. Nobody in any industry has a "safe" job today. Mythic just concluded a massive project and should be looking at a nominal ramping down after launch, so some cuts at Mythic if needed should be absorb-able here. We will hope after taking a year to recreate this team from its second move in what,seven?, years they will leave well enough alone.

2) If you choose to believe that EA has wanted to get rid of UO in the past (as Jacobs has claimed), then an economic downturn gives the executives a justifiable reason for pulling the plug on UO. Even if UO is profitable, it doesn't have the potential to pull in the big bucks like a new release (i.e. not profitable enough), and might not be worth the headache of keeping around.

No one turns off a money stream. Regularly they will look for ways to make it flow faster but no one ever says, "Hey we have too much money, tell them to stop writing those checks."
If they did Donald himself would show up like a genie out of a bottle to utter that infamous phrase on the spot.

My guess would be less money for new console products while we wait and see what the Christmas season brings, Following up on prior commitments, more, not less, accessory sales to online gamers through the company site to maximize profitability, and maybe just maybe a stronger commitment to advertising and customer service. Those are the moves that ensure increase of market share in a down economy.

Original Tokuno dyes in sets of ten for the holidays anyone?

 

[RoycroftLS]

No one turns off a money stream. Regularly they will look for ways to make it flow faster but no one ever says, "Hey we have too much money, tell them to stop writing those checks."
If they did Donald himself would show up like a genie out of a bottle to utter that infamous phrase on the spot.

I tried to avoid comments like these by emphasizing the word enough in the phrase "profitable enough"...

What if someone spends $1 million on a game, and it makes a $1,000 profit over the course of a year? Yes, it is a money stream, but considering they could have gotten at least a 10-fold better return through a government bond, the return doesn't justify the investment.

Yes, from what we have been told (and from a business standpoint), it's likely not the case that UO is a worse investment than the risk-free interest rate. But what if UO isn't as profitable as the rest of the games in the EA lineup? If a cut has to be made somewhere, generally it would make sense to cut out the worst performers first.

There's also the matter of scale to consider. Compared to other EA games, UO is a small-scale game. Even if UO has a higher profit percentage than other games, it could still end up getting the axe. As in, at some point it may make more business sense to close one small game entirely than to lay off one person from each game. While that doesn't seem likely for UO according to this article, it is something to consider.

 

[Alvinho]

Kinda funny that the stock market dumb****s are not raiseing the prices of oil speculations becasue of the credit crunch, makeing gasoline more approiately priced.

 

[Dermott of LS]

...

Commodity prices have been in as much of a bubble as housing prices.

Oil could not sustain a $140/barrel price tag just as gold could not sustain $1200+/oz just as silver could not sustain $24+/oz, nor could platinum sustain $2200/oz or Rhodium $10,000 an ounce (Rhodium has lost 85% of it's high value in just under two months BTW).

Plus the value of the US Dollar in the currency markets has risen a good 20 points from the mid 60's to the mid 80's on a certain watched weighted index in that time.

The demand for oil dropped HUGE once the price reached the $4 mark and was only temporarily skewed by Gustav hitting the Houston area causing a temporary gasoline shortage and panic.

Since then, oil has dropped down to the mid $60s (around $65 as of today's closing) and the price of a gallon of gas has dropped accordingly (between $2.00 and $2.65 in most areas).

Oil is not immune from the changes in the market place and the amount of people changing their habits to not take vacations, take alternate transportation and other methods have caused there to be a larger than expected supply right now which even after OPEC's meeting called for a 1.5 million barrel per day drop in production could not stop the slide of the price of oil per barrel.

On the homefront (US), MANY companies small and large watch and wait for the results of next Tuesday with MANY business owners considering if they should sell their business before the end of the year or what cuts they will have to make based on the proposals of the two main parties and the possible balance of power... thus EA is doing the same thing.

What EA is doing MIGHT affect UO, but it is not because of UO.

Hopefully, our Devs, like myself, will duck the hatchet as it is flailed wildly about.

 

[Warrior of Time]

I would think the games that have a world wide player base on line would be one of the last to go rather than one that is sold in only one country. Most likely games that are going to be dropped would do so after the Christmas Holiday. When they could better tell the ones to keep.

 

[Sweeney]

Watch out for when the price of legacy tokens fall on uogamecodes.. people will buy them up and 2 weeks later the game will get shutdown, a nice quick last profit.

 

[Radun]

if all the companies lay people off, that means there's less people with the money to buy their products... EA THINK TWICE

 

[Viquire]

I tried to avoid comments like these by emphasizing the word enough in the phrase "profitable enough"...

What if someone spends $1 million on a game, and it makes a $1,000 profit over the course of a year? Yes, it is a money stream, but considering they could have gotten at least a 10-fold better return through a government bond, the return doesn't justify the investment.

Well, if we were talking about an online game where art, hardware, programmers and systems analysts had to be specifically employed for launch then I would have to say the company is in a prime position to cut costs by as much as half a million and enjoy a nice increase to the bottom line through maintaining their presence in the marketplace.

Yes, from what we have been told (and from a business standpoint), it's likely not the case that UO is a worse investment than the risk-free interest rate. But what if UO isn't as profitable as the rest of the games in the EA lineup? If a cut has to be made somewhere, generally it would make sense to cut out the worst performers first.

Again, if we were talking about allocation and profit per square foot ratio in say a retail gifting store then this makes sense. However the store size is unlimited and the companies objective is to increase overall market share through turning out high quality products and maintaining and managing expenses and customer satisfaction.

There's also the matter of scale to consider. Compared to other EA games, UO is a small-scale game. Even if UO has a higher profit percentage than other games, it could still end up getting the axe. As in, at some point it may make more business sense to close one small game entirely than to lay off one person from each game. While that doesn't seem likely for UO according to this article, it is something to consider.

Your business philosophy and mine differ. If you have a profitable asset, tangible or not, then it is up to people with entrepreneurial spirit to be creative and continue to invest in such a way as to maximize long term profits. If an owner feels they are unable to do so then prudence would demand, for the sake of the investors, that every portion of capital investment that can be realized from its sale to an interested party should be explored. There are a ton of free to play games that rely almost solely on marketing and advertisement income to keep them afloat, and we are not even seeing regular, as in quarterly, offerings from the code store.

This latest publish is huge. Our producer sounds very upbeat, which of course he would. And we will never be able to see the wealth of data that gets analyzed somewhere, daily, to base more sound decisions for the company on. UO is looking mighty spunky. Online gaming is the future. I think we can feel confident about ours for awhile.

 

[Draxous]

It's not just EA. Just in the past week and a half or so, quite a few people at my company have been laid off and EVERYONE is nervous right now... and up to the past couple of months, our year has been one of the heaviest yet.

Part of this has to do with politics right now too. A democratic president (and congress) will tax businesses. And it might be by a lot more than we expect.

Where do you suppose they get the money to pay for this.. 'new tax?'

why oh it's... us.

1. They raise the price of their goods and services so you pay more to cover this new cost.

2. They make the product or do the service more efficiently (basically... cut jobs, reorganize and/or not hire more)


We're in a recession... and democratic ideals are meant more for economic booms...

*shrugs*

I my career... specially now.

 

[Maplestone]

if all the companies lay people off, that means there's less people with the money to buy their products... EA THINK TWICE

Alas, the classic Prisoner's Dilemma of capitalism. If everyone cooperates, the economy grows. But as soon as the mood shifts, those who continue to be cooperative go bust.

 

[Viquire]

Alas, the classic Prisoner's Dilemma of capitalism. If everyone cooperates, the economy grows. But as soon as the mood shifts, those who continue to be cooperative go bust.

That was a long read, but interesting. Similar in both respects to Atlas Shrugged.

 

[Maplestone]

Similar in both respects to Atlas Shrugged.

hmm ... I've always felt expending brain cells on Ayn Rand is like using anthrax as a deodorant.


(er ... *struggles to keep on-UO-topic* ... using poison potions to cure fungus-infected plant?)