EA Shares Drop After Job Cuts, Outlook

NEW YORK (AP) — Shares of Electronic Arts Inc. took a hit Tuesday, the day after the video game publisher said it is cutting 1,500 jobs and announced it bought Playfish Inc., a maker of online social games.

Electronic Arts said the job cuts, representing about 17 percent of its work force, are expected to save about $100 million a year.

The company acquired Playfish for $275 million in cash. It will also pay up to $100 million if Playfish hits certain financial targets by the end of 2011, plus $25 million in stock-based retention agreements with Playfish employees.

"The reality is that EA remains a company in transition," wrote Broadpoint AmTech analyst Benjamin Schachter in a note to investors. "As it tries to figure out how to right-size itself and execute, the timing and the form of the transition to digital are still unclear."

EA posted adjusted results for its fiscal second quarter that were roughly in line with analysts expectations. But, noted Schachter, "all eyes were on guidance and expectations of cost cuts."