Activision Blizzard to Cut Jobs -- WSJ
February 13 2019 - 3:02AM
Dow Jones News
By Patrick Thomas and Sarah E. Needleman
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (February 13, 2019).
Activision Blizzard Inc. said it plans to cut about 8% of its
workforce as it grapples with changes in how people buy and play
videogames.
The cuts will eliminate around 775 people from Activision
Blizzard's workforce of about 9,800. The company expects to record
$150 million in pretax charges in connection with the moves, most
of which will be incurred this year.
The job cuts underscore the tough environment videogame makers
face as players increasingly sink their time and money into only a
handful of games they can play in perpetuity -- the current king
being "Fortnite." The stakes are high: Players who aren't kept busy
in one game might take their time -- and money -- to a rival.
Activision Blizzard sounded that theme again Tuesday, telling
analysts it plans to add to its developer team to produce content
for existing franchises more quickly. As part of the restructuring,
Activision Blizzard plans to boost its number of developers by
about 20% in 2019 to ramp up new content for its biggest
franchises, such as the shooter game "Call of Duty".
Releasing new content has been a critical strategy for Epic
Games Inc., the maker of "Fortnite." While the combat game's
popular battle-royale mode is free, it is estimated to have made
$2.4 billion in revenue from virtual goods since launching in
September 2017, according to SuperData Research. Electronic Arts
Inc. on its earnings call last week blamed intense competition from
"Fortnite" and other games for turning in quarterly revenue below
guidance.
On Activision Blizzard's call, analysts asked whether the
company would consider making its shooter game "Overwatch" free,
particularly after Electronic Arts launched a free battle-royale
game last week called "Apex Legends." Operating chief Collister
Johnson demurred, saying the company prefers to focus on creating
compelling content.
Activision Blizzard's three main units -- Activision Publishing,
Blizzard Entertainment and King -- operate with some autonomy, and
the cuts are aimed at centralizing sales, marketing and other
functions with the parent company.
Shares rose 3.3% after hours, despite Activision Blizzard's
softer-than-expected guidance for 2019. The stock has lost more
than half its value since closing at $83.39 on Oct. 2, dragged
lower as part of the broad tech selloff in the fall, and hammered
again last week following earnings from rivals Electronic Arts and
Take-Two Interactive Software Inc.
Activision Blizzard reported profit of $650 million, or 84 cents
a share, compared with a loss of $584 million, or 77 cents a share,
a year earlier, when the company took a hit from the new U.S. tax
law. On an adjusted basis, Activision Blizzard earned 90 cents a
share, ahead of the 84 cents expected by analysts, according to
FactSet.
Revenue rose 17% to $2.38 billion. On an adjusted basis, revenue
came to $2.84 billion, below the $3.04 billion analysts
expected.
"We didn't execute as well as we hoped to in 2018," Chief
Executive Bobby Kotick told analysts, "and our current outlook for
2019 falls below what is possible in an industry filled with growth
opportunities."
For the full year, the company projected adjusted earnings of
$1.85 a share on $6.03 billion in revenue. Analysts had expected
$2.34 a share on $7.45 billion in revenue.
Exacerbating Activision Blizzard's woes is a thin slate of games
for the coming year. The company's Blizzard Entertainment unit
didn't announce release dates for any new games at its annual
convention in November.
"We're making changes to enable our development teams to create
better content for our biggest franchises more quickly," Mr. Kotick
told analysts. Activision Blizzard also plans to launch a new
city-based league for "Call of Duty," akin to its existing
"Overwatch" league.
In its latest quarter, the company said its number of monthly
active users rose about 11 million to 356 million after declining
for three consecutive quarters.
Separately, several top executives have left Activision Blizzard
in the past year, including Blizzard founder Mike Morhaime and the
unit's finance chief, Amrita Ahuja. The parent company fired its
finance chief, Spencer Neumann, in early January after he was
poached by Netflix Inc. for the same position.
On Tuesday the company said its board had approved a new program
to buy back up to $1.5 billion of its stock over the next two
years.
Write to Patrick Thomas at Patrick.Thomas@wsj.com and Sarah E.
Needleman at sarah.needleman@wsj.com
(END) Dow Jones Newswires
February 13, 2019 02:47 ET (07:47 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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