Activision to cut 8% of staff on weak sales forecast

RESTRUCTURING::The company plans to increase the number of game developers by 20 percent, while cutting administrative expenses and centralizing sales functions

Bloomberg

Thu, Feb 14, 2019 - Page 10

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 about US$150 million in expense in connection with the belt-tightening.

On a conference call with investors on 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 is to 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.

Moreover, 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 US video-game publisher, reported revenue of US$2.84 billion last quarter. That missed the US$3 billion projection by analysts. It expects revenue of US$1.18 billion in the current period, short of the US$1.48 billion consensus.

CEO Bobby Kotick on Tuesday said that the company had fallen short of its “full potential.”

Activision severed ties with game maker Bungie last month after disappointing sales of the Destiny franchise.

On Tuesday’s call, management said continued investment in the title, which the firm did not own, would only have diverted resources from internal opportunities.