Electronic Arts to Cut 1,500 Jobs After Latest Loss

Electronic Arts to Cut 1,500 Jobs After Latest Loss

Nov. 9 (Bloomberg) -- Electronic Arts Inc., the second- largest video-game publisher, plans to cut 1,500 jobs as Chief Executive Officer John Riccitiello battles shrinking industry sales that have contributed to 11 straight quarterly losses.

The maker of “Madden NFL” reported its second-quarter loss widened to $391 million, or $1.21 a share, from a loss of $310 million, or 97 cents, a year earlier, according to a statement today. Excluding some items, Redwood City, California- based Electronic Arts posted profit of 6 cents, missing the 10- cent average estimate of 18 analysts surveyed by Bloomberg.

Riccitiello’s push to return Electronic Arts to profitability by cutting costs and publishing fewer titles faces headwinds with a 13 percent slide in U.S. retail sales of video games this year through September. The company today purchased Playfish Inc., a maker of games for the social-networking sites Facebook Inc. and MySpace, for as much as $400 million.

“At this point management must be feeling some pressure,” said Todd Mitchell, an analyst at Kaufman Brothers LP in New York. “They were disastrously below where they planned coming into the September time frame.”

Full-year profit will be 70 cents to $1 a share, excluding changes in deferred revenue and stock-based compensation, the company said. Electronic Arts previously projected 2010 profit of $1 a share. Analysts estimate 90 cents on sales of $4.3 billion.

Industry Outlook

Industry sales this year will be down in the “mid to high single digits” in percentage terms, Riccitiello said on a conference call.

Electronic Arts fell 32 cents to $19.21 in extended trading. The stock added 53 cents to $19.53 at 4 p.m. New York time in Nasdaq Stock Market trading and has advanced 22 percent this year.

The job cuts announced today will reduce the staff by 16 percent, incur restructuring costs of as much as $150 million and save at least $100 million annually, the company said.

They mark the second round of reductions at Electronic Arts in 14 months. In September 2008, the company began a series of firings that eliminated 10 percent of the payroll.

“We are making tough calls to cut costs in targeted areas and investing more in our biggest games and digital businesses,” Riccitiello said in the statement.

Sales rose 1.9 percent to $1.15 billion in the period ended Sept. 30, compared with the $1.14 billion projected by analysts. Retail sales of the “Madden NFL” football game, released Aug. 14, were down 13 percent through September from a year earlier, according to NPD Group Inc., a researcher based in Port Washington, New York.

The company may benefit from Sony Corp.’s $100 cut in the price of the PlayStation 3 console and holiday sales of Nintendo Co.’s Wii, said Mitchell. He recommends buying the shares.

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