EA Posts $310 Million Loss in Q2, Plans to Cut 6% of Workforce (WII)

Electronic Arts today announced its fiscal results for the second quarter ended September 30. The publisher's net loss widened from $195 million to $310 million, in part thanks to larger marketing and development costs. Net revenue, however, grew by 40 percent ($254 million) to $894 million. EA said it had a net deferral of $232 million of net revenue "related to certain online enabled packaged goods games and digital content."

The big sales drivers for the quarter as you might expect were Madden NFL 09 (4.5 million copies sold), Spore (almost 2 million sold in three weeks), and Warhammer Online (1.2 million sold).

"Considering the slow down at retail we've seen in October, we are cautious in the short term," commented John Riccitiello, Chief Executive Officer. "Longer term, we are very bullish on the game sector overall and on EA in particular. The industry is growing double-digits on the strength of three new game consoles and increases in the number of homes with broadband internet connections. EA is well positioned to benefit from these technology drivers due to the strength of our creative studios and our broad collection of game properties--from The Sims, to Spore and Madden NFL, to Warhammer Online."

Importantly, EA today also announced a "cost reduction plan" that unfortunately will lead to roughly six percent of the company's workforce being laid off. EA employs over 9,000 people, so that would be around 540 staff getting cut. EA believes that this will result in annual pre-tax cost savings of approximately $50 million.

EA today also lowered its full-year profit outlook, but the company left its revenue forecast unchanged.

Update: According to Gamasutra, two of the studios affected by the layoffs today are Electronic Arts Los Angeles and Pandemic. The staff reduction, however, is indeed global and affects closer to 600 (as opposed to our 540 estimate above).

EA spokesperson Mariam Sughayer explained, "It's a global reduction, not just focused on one studio or one location. The decisions that impact people's jobs are always extremely tough, but all the people affected will be treated appropriately and respectfully, with the appropriate severance package based on their time at the company and other mitigating factors. While we had good progress in growing revenue and increasing product quality, we have an ongoing imperative to manage our cost structure." She added that part of the cost reduction plan also includes a slowdown in hiring and the closure of open positions.