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EA: Layoffs Won't Hamper Growth Goals, Media Rumors 'Exaggerated'

Amid reports of studio layoffs Electronic Arts responds to analyst concerns that its widespread cost reductions might damage its execution -- suggesting some of the media layoff reports are "exaggerated" or "flat-out wrong."

Leigh Alexander, Contributor

February 2, 2009

3 Min Read

Widespread media reports on Electronic Arts' ongoing restructuring have prompted some analysts to wonder if the company might not be getting too drastic. But Electronic Arts tells Gamasutra that some of the reports are either "exaggerated" or "flat-out wrong," and stresses its planned cuts will not interfere with growth goals. That appears to be a concern for Wedbush Morgan analyst Michael Pachter, who in a note to investors suggested that EA's significant workforce reduction might make it harder in the end for the publisher to meet its goals. "We see significant execution risk near term due to the magnitude of the restructuring," Pachter says. Electronic Arts has repeatedly responded to comment requests by declining to comment further on its staff decisions until its financial results call on February 3rd. But speaking to Gamasutra today, EA corporate communications VP Jeff Brown says that although the company still won't provide specific details, it's unwise to believe everything you read. "It would be very difficult for anyone to accurately assess the restructuring based on rumors and estimates running in the media," says Brown. "I hope analysts will withhold judgment until we’ve offered a more complete story in our scheduled earnings call on February 3." Although EA announced a consolidation at Canada-based Need For Speed developer Black Box in December, multiple consumer outlets have since published anonymously-sourced reports suggesting the studio had been "gutted". But just today, the publisher announced three new games in the franchise -- if the reports are accurate, could EA be asking its studios to do much more with much less? Brown notes that much of the anonymously-sourced reporting on the restructuring has been aptly tagged as "rumor." Black Box, Tiburon, Mythic, Pandemic and EA Canada have been reported as taking staff hits due to the cost-cutting plan. "Some of the information is exaggerated; some of it is flat out wrong," he says. "In particular, the reports that EA has closed Black Box, and the layoff numbers associated with that studio are false." Brown notes that the ten percent headcount reduction is applied across all areas, including support and corporate personnel, and not solely project teams, and asserts that by headcount and projects in development, EA remains the world's largest publisher. As previously-announced, the company plans a total headcount reduction of 1,000 employees, in a plan aimed at saving $120 million annually. But as to the suggestion that the reduction might hamper the publisher's future prospects, Brown says: "EA’s CEO has directed managers to make cuts that do not conflict with our growth goals." Pachter notes EA's share price has failed to respond to the company's conservative cost reduction initiatives. The analyst suspects EA's investors will wait until they see the results: "EA is a 'show me' story," he says, "and we do not expect appreciation until management communicates a sustainable plan to complete the turnaround." Concludes Brown, "EA will continue to take creative risks, invest in new IP, and make the transition to servicing players with downloadable content."

About the Author(s)

Leigh Alexander


Leigh Alexander is Editor At Large for Gamasutra and the site's former News Director. Her work has appeared in the Los Angeles Times, Variety, Slate, Paste, Kill Screen, GamePro and numerous other publications. She also blogs regularly about gaming and internet culture at her Sexy Videogameland site. [NOTE: Edited 10/02/2014, this feature-linked bio was outdated.]

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