George S. May Business Blog

Hey kids! It’s Turnover Tuesday! — EA hires and fires a huge amount of people in one day

Here is something you don’t hear about everyday. An immense and immediate staff turnover.

Electronic Arts was quite busy today as it acquired social media game company Playfish for $275 million, plus bonuses (should the staff perform well), and fired 1,500 of its own employees.

Quite an interesting move if you ask me. Not only is it out of the ordinary for a company to have large turnover, in one day nonetheless, but it also a bit unusual for a company like EA to pay so much for such a small, young company. Playfish is only two years old! Put it this way, EA trades for 1.5 time annual revenue so Playfish would have to have revenue of nearly $200 million to have a similar a valuation similar to its new parent. That just doesn’t seem likely.

So why would EA make such a drastic move? Well, they had to do something! To be frank, EA stunk it up this past year, so the temptation to find new, successful technology is very great. EA’s revenue for the quarter ending September 30 was $778 million down from $894 in the same period a year ago and the company had a net loss of $391 million compared to $310 million last year.

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