Activision to Cut 8% of Staff After Delivering Weak Forecast
(Bloomberg) -- Activision Blizzard Inc. plans to eliminate 8 percent of its workers as part of a companywide restructuring, an effort to get the maker of Call of Duty back on track after a disappointing sales forecast.
The layoffs would affect hundreds of workers at the company, which expects to record a roughly $150 million expense in connection with the belt tightening. Bloomberg reported last week that the video-game maker was preparing to make the cuts.
On a conference call with investors Tuesday, Activision said sales of key games such as Call of Duty, Overwatch and Hearthstone have been disappointing. One particular area of weakness is in-game purchases -- a critical focus in an era when many titles are free to play and companies look to generate revenue by selling virtual outfits, tools and other content.
As part of the turnaround plan, Activision will increase the number of developers working on its most popular games by 20 percent, while reducing administrative costs and centralizing sales functions.
“We have determined that we need to refocus our best resources on our biggest opportunities and to remove an unnecessary level of complexity and duplication that is built up in certain parts of the business,” Chief Operating Officer Coddy Johnson said on the call.
The announcement extends a tumultuous stretch for the video-game industry. Electronic Arts Inc. and Take-Two Interactive Software Inc. both saw their stocks plunge last week after they released earnings. Companies are having to work harder to keep gamers hooked, especially as they compete with Epic Games Inc.’s watershed title Fortnite, which is free to play and available on multiple devices.
A series of executive departures have added to the turmoil for Activision. Eric Hirshberg, the chief executive officer of Activision Publishing, and Mike Morhaime, the longtime head of Blizzard, both announced plans to step down. And on New Year’s Eve, Activision said it was firing Chief Financial Officer Spencer Neumann -- shortly before he took the same position at Netflix Inc. Tim Kilpin, a toy-industry veteran recruited to lead Activision’s consumer-products division two years ago, retired this month.
Activision, the largest independent U.S. video-game publisher, reported revenue of $2.84 billion last quarter. That missed the $3 billion projection by analysts. It expects revenue of $1.18 billion in the current period, short of the $1.48 billion consensus.
CEO Bobby Kotick said on Tuesday that the company had fallen short of its “full potential.”
The outlook initially sent the stock down as much as 5 percent in late trading, but the shares rebounded as Activision laid out its comeback plan. They were up 3.2 percent as 6:19 p.m. in New York.
Activision severed ties with game maker Bungie last month after disappointing sales of the Destiny franchise. On the call Tuesday, management said continued investment in the title, which the company didn’t own, would only have diverted resources from internal opportunities.
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