Activision Blizzard to Lay Off 8 Percent of Workforce in Restructuring

Bobby Kotick-Getty-H 2019
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The company's fourth quarter earnings disappointed with revenue of nearly $2.4 billion and earnings of 84 cents per share.

Activision Blizzard's business isn't immune to pressure from competition. 

The video game publishing giant on Tuesday said that it is laying off around 8 percent of its workforce, or more than 750 employees, as the business undergoes a restructuring that will include de-prioritizing initiatives that are not meeting expectations and reducing some non-development and administrative costs. As part of the restructuring, Activision will incur a pre-tax charge of around $150 million. 

The shift is meant to help Activision prioritize its biggest franchises — Call of Duty, Candy Crush, Overwatch, Warcraft, Hearthstone and Diablo — amid increased competition from free-to-play games like Fortnite, and the number of developers working on those games is expected to increase around 20 percent this year.  

The news came as the company announced fourth-quarter revenue of nearly $2.4 billion and earnings of 84 cents per share. Although the results were strong compared to past quarters, they were much lower than the revenue of $3.04 billion and earnings of $1.28 per share that Wall Street was anticipating. 

"While our financial results for 2018 were the best in our history, we didn't realize our full potential," CEO Bobby Kotick said in a statement. "To help us reach our full potential, we have made a number of important leadership changes. These changes should enable us to achieve the many opportunities our industry affords us, especially with our powerful owned franchises, our strong commercial capabilities, our direct digital connections to hundreds of millions of players, and our extraordinarily talented employees." 

Kotick was referencing several high-profile departures at the company in recent months, including Activision Publishing CEO Eric Hirshberg and Blizzard head Mike Morhaime. 

The weak earnings for the final three months of 2018 come amid a rocky period for the company. Over the last year, Activision's stock has lost 39 percent of its value. On Tuesday, it closed up nearly 4 percent to $41.67. The earnings results caused investors to push it back down more than 3 percent after-hours for a brief period before it rebounded to rise more than 4 percent. 

Late last week, Bloomberg reported that Activision was planning to lay off as many as several hundred employees as part of a restructuring. Kotick explained the cuts in a call with investors, saying that they would allow the company to create new content more quickly for its most popular franchises as well as focus in on new growth areas like e-sports and the platform. 

These challenges come as marquee Activision Blizzard titles have seen sluggish user growth. During the fiscal fourth quarter, Overwatch and Hearthstone were flat, while World of Warcraft saw declines. Meanwhile, the publisher revealed plans to part ways with Destiny 2 developer Bungie when their 10-year deal expires. The 2017 release was received positively by critics but did not sell as well as Activision expected. "We're confident it was the right decision for both parties," COO Coddy Johnson told investors, explaining that it allows Activision to focus on the IP that it owns. "It was a mutual and amicable agreement." 

The business did have some bright spots. Call of Duty: Black Ops 4 sold through more units in its launch quarter than Call of Duty: Black Ops III did, and Candy Crush Friends Saga helped drive King to 268 million monthly active users.