Activision's Plan to Cut Hundreds of Jobs Caps Tumultuous Week

(Bloomberg) -- A painful stretch for the video-game industry isn’t over.

Activision Blizzard Inc. plans to announce job cuts Tuesday in the face of slowing sales, according to people familiar with the matter, bringing fresh upheaval after spotty results roiled stocks this week. The shares dropped as much as 2.5 percent to $42.88 on Friday.

The layoffs, which could number in the hundreds, are part of a restructuring aimed at centralizing functions and boosting profit, said one of the people, who asked not to be identified because the changes haven’t been announced. Activision employed 9,800 people at the end of 2017.

The game maker, one of the largest in the world, acknowledged on a November conference call that some key titles, such as Overwatch and Hearthstone, were seeing flat or declining numbers of users. After disappointing sales of Destiny 2: Forsaken, the company parted ways with its developer, Bungie Inc., a move that could reduce annual revenue by as much as $400 million.

Analysts expect Activision’s sales to decline by about 2 percent this year, to $7.28 billion.

The company, which has bulked up over the years through acquisitions, including PC-game maker Blizzard Entertainment and mobile-game company King Digital, has historically given its various divisions considerable autonomy under longtime Chief Executive Officer Bobby Kotick.

Executive Departures

Over the past year, a number of executives have left, including Eric Hirshberg, CEO of Activision Publishing, and Mike Morhaime, the longtime head of Blizzard.

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 isn’t alone in stumbling. Electronic Arts shares fell 13 percent Wednesday after the company confessed that some of its biggest releases disappointed. But it rebounded later in the week.

Take-Two Interactive Software Inc. fell by a similar amount Wednesday after forecasting sales this quarter that were $100 million below Wall Street forecasts. The results were a reminder that video games are still a hit-driven business, rising and falling based on unpredictable consumers.

©2019 Bloomberg L.P.