EA Buys Playfish…and Then Lays Off 1,500 Employees

By Geoff Duncan November 10, 2009

Electronic Arts + Playfish

Electronic Arts might be the titan of the video game publishing industry, owning top-selling franchises and churning out game after game for essentially every viable platform on the planet. But the company is not immune to the tight global economic climate…and nor is it immune to market forces that are quickly reshaping the gaming industry. Yesterday Electronic Arts announced a new deal to acquire social gaming company Playfish for some $275 million, then turned around and revealed a net loss of $391 million for its fiscal second quarter along with plans to cut an additional 1,500 jobs from its payrolls.

“EA is performing well, with quality, sales, and segment share up so far this year,” said EA CEO John Riccitiello, in a statement. “We are making tough calls to cut cost in targeted areas and investing more in our biggest games and digital businesses.”

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The $391 million loss for the quarter is even higher than the $310 million the company lost in the same quarter a year ago; however, the company’s adjusted revenue did actually increase during the quarter to a mammoth $1.15 billion, up about 2 percent and exceeding analysts’ expectations. For the year, EA is forecasting sales of $3.6 to $3.9 billion, with a net loss between $.120 and $2.05 per share; however, on an adjusted basis EA forecasts a profit of between 70 cents and $1 per share.

The 1,500 layoffs follow 1,100 job cuts at EA earlier this year, which EA eliminated to focus its resources on its top-selling titles and franchises. EA expects most of the positions will be cut by March 2010. The 1,500 positions represent about 17 percent of EA’s workforce.

EA’s newest acquisition, Playfish, focuses on creating social and mobile games for platforms like Facebook, MySpace, and the iPhone with titles like Pet Society, Restaurant City, and Country Story. EA is looking to Playfish to speed up the company’s transition to social gaming and digital content, and will roll Playfish into EA Interactive, the group that handles EA’s Web and wireless efforts.

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