Activision Blizzard said Tuesday that it is laying off 8% of its workforce and restructuring its business to focus on its top games. It’s another sign of how much Fornite’s popularity has upended the video game industry.
The company said that it plans to take a $150 million charge in order to de-prioritize games that aren’t doing as well. Activision Blizzard will cut about 750 jobs. The company had just under 10,000 employees at the beginning of last year. At the same time, the company said that it planned to increase the number of developers for its most popular games by 20%.
Although the company posted record sales in the fourth quarter and in all of 2018, CEO Robert Kotick noted that the company’s performance nevertheless failed to live up to the company’s expectations.
“We didn’t execute as well as we hoped to in 2018, and our current outlook for 2019 falls below what is possible in an industry filled with growth opportunities,” Kotick said on a conference call with analysts. “We didn’t achieve the reach, engagement and player investment goals we set for ourselves.”
The company expects 2019 to be a transition year, predicting that it won’t grow in-game sales as quickly as it had hoped. Kotick said the company will have to make significant changes to achieve its long-term goals, including some back-office support staff reductions, laying off staff at some poorly performing games and focus more on live, streaming game experiences for customers.
Activision Blizzard (ATVI), which owns the “Call of Duty,” “World of Warcraft” and “Overwatch” franchises, isn’t the only gaming company that has struggled to keep up with the surging interest in free multiplayer games, including Fortnite. But it has been hit harder than competitors Electronic Arts and Take-Two Interactive.
EA (EA) reported poor results last week that caused the stock to plunge 16% at one point. But shares have surged in the past few days thanks to the strong debut of Apex Legends, a free game that is similar to Fortnite. EA (EA)’s stock is now up more than 30% this year.
Take-Two Interactive (TTWO) also disappointed investors with a weak outlook, but that company still had a big hit during the holidays with its latest Red Dead Redemption game.
Activision Blizzard, meanwhile, hasn’t given its shareholders much good news lately. The company announced earlier this year that it was ending its relationship with the developer behind the successful “Destiny” game franchise. That news caused the stock to fall 9%.
“This industry is very hit driven, perhaps more than ever, and the hits are harder and harder to come by,” said Scott Kessler, an analyst with CFRA. “Activision doesn’t seem to have a big game right now.”
Kessler added that some of the company’s biggest investments may also be backfiring. Activision Blizzard acquired King Digital, the maker of Candy Crush Saga, for nearly $6 billion in 2016. But that game’s popularity has waned in recent years.
The company also lost some high profile executives this year, including former chief financial officer Spencer Neumann. He joined Netflix (NFLX) as its CFO in early January.
Just a few days later, the CFO of Activision’s Blizzard Entertainment subsidiary, Amrita Ahuja, left to become the CFO of Square (SQ), the mobile payments company. Blizzard co-founder Michael Morhaime is also leaving Activision in April.
The Activision Blizzard reorganization was announced in conjunction with the company’s latest earnings. Activision Blizzard’s sales and profit rose in the fourth quarter, but the company issued sales and earnings guidance for the first quarter that was below estimates. Wall Street analysts are also expecting a slight drop in earnings and revenue this year.
Activision Blizzard’s stock was up about 1% after hours Tuesday. Shares are down more than 10% this year.
–CNN Business’ David Goldman contributed to this report