Two weeks after Activision Blizzard’s layoffs, its stock price is barely higher than before the layoffs

    
40
Going under.

You all remember when Activision Blizzard laid off 800 employees on a year that was, on balance, a very good year for the company? Of course you do. And you probably also remember that the presumed reason for doing so was to bolster the company’s stock after it had fallen to a two-year low, at $40.11 per share. It was a hideous decision made for poor reasons, but at least it bolstered the company’s stock, so you could understand it on that level.

Except that it didn’t. It’s been two weeks since the mass layoff and the company’s stock is (as of this writing) sitting at $41.50 per share, scarcely higher than before the massive layoffs that have drawn widespread criticism. (For comparison, six months ago the stock sat at $74.09 per share.) We are admittedly not privy to all of the behind-the-scenes negotiation and planning that goes on at Activision Blizzard, but this does not seem to have quite been the intended set of consequences.

Source: Twitter
newest oldest most liked
Subscribe to:
Reader
Loyal Patron
Patreon Donor
mike foster

Kotick has long been known, on the record, as a guy who doesn’t “get” games or care about them outside of their profit margin. It makes sense that he’d oversee something like this, forcing Blizz into tighter timelines (less of the “it’s done when it’s done”) mentality and eventually the profit-over-people decision-making tree.

Once Morhaime left I think the signal was pretty clear to the Blizz lifers: Start interviewing.

The long-term problem is, however, that the more you do this the more you lose the ability to make those profit-driving games. The next billion-dollar game from Blizzard won’t be from Blizzard at all, but from a team that was exited that either went to another studio or formed their own.

Reader
Sally Bowls

Short-term? Who outside of gamer social media thinks this was short term? Hiring 20% more devs is good for the long term, but probably won’t break-even within a year. The % of Western devs working at Blizzard will increase, not even counting the Trion and Anet news.

In a better world, these people would not have kept those jobs; rather those jobs would never have been filled and thus they would never have been hired.

Remember, this is not near the largest Blizzard layoff. The one earlier this decade was half again as severe, 13% vs 8% IIRC. That one was mostly about people whose job was replaced by automation. (which will happen more and more: https://hardware.slashdot.org/story/19/02/24/0830238/pepsico-is-laying-off-corporate-employees-as-the-company-commits-to-relentlessly-automating) It had little impact on developer headcount.

I don’t know the details, but Blizzard’s narrative of reducing the number of employees who don’t make games and increasing the number of employees who do make games seems desirable, albeit in the longer term.

If NCSoft lays off 200 American PC devs and hires 200 Korean mobile devs, that is not about cost savings; that is about realignment. If the industry revenue is 50% mobile, 25% console, 25% PC, then I would expect the dev headcount to evolve to reflect that over time. Now companies can re-align their employees to reflect the market (what customers want to buy) in a number of ways. They can reduce PC devs (e.g. ANet) or they can reduce overhead(non-devs) (e.g. Blizzard.) As a PC person, I prefer the latter.

Mordyjuice
Reader
Mordyjuice

Kind of hard to justify all those employees when Blizzard stopped making actual games in favor of making money off of services to existing titles. Make Diablo 4 and watch those shares sky rocket.

At least ANet was attempting to develop new products when NCSoft crapped on them.

Reader
Utakata

…yep, it created a tsunami in a tea cup. /le sigh

Reader
Utakata

“I’m not sure the peeps get what you mean, Uta.”

I wonder that too. But essentially despite making a big wave (the tsunami), little change on their stock value (the tea cup). Besides…spilling a a lot of tea in the process.

…or to put it another way, as Lady Lady Sylvanas once said, “You have won nothing!” >.<

Reader
Loyal Patron
Patreon Donor
Kickstarter Donor
Dean Greenhoe

I believe the stock would perform far better if the got rid of corporate jets and yachts instead of employees.

Reader
styopa

Yes, the ‘bump’ is nearly gone, but the anchor on revenues ISN’T.
BTW: If you’re firing people to get a ephemeral bump in your stock value, you’re an asshole.
In my experience running businesses, firings are more to with ongoing balance sheet and you expect (if that’s your metric) that the benefit will come with ongoing higher profits and better cashflow for small businesses.

Reader
Targeter

This swimming bear gets it. Any short-term benefit or impact will be just that; short-term. Long-term, a reduction in force is generally the result of projected costs not meeting projected revenues. IE, they don’t have enough content or product in the pipeline to justify their future expenses and therefore have to dump personnel to keep their PTP in-line with expectations.

Reader
BDJ

Yep. I don’t know why this is so hard to grasp. People just want to be mad.

Reader
Kickstarter Donor
Greaterdivinity

Good. Hopefully this will disincline companies towards making big layoffs in order to raise their short term stock value. It won’t, but we can hope.

Reader
Armsman

Nah – with many other gamer related companies stocks tanking, Activision/Blizzard will try to spin this as a ‘win’ in that they managed to stabilize the stock; instead of seeing in plunge further.

Reader
BDJ

Its not just gamer related companies. The markets took a huge hit recently. Its like people completely ignore this.

“ZOMG ACTI STOCK DOWN…. lets ignore the 1000s of other non-gaming companies that are also down!”

Reader
Loyal Patron
Patreon Donor
Armsbend

the market is only a few percentage points away from a full recovery off of it’s high – ATVI on the other hand has not recovered in the slightest.

Reader
BDJ

Im just talking about the original tumble. It came with every other stock. They aren’t doing themselves any favors though.

Reader
Loyal Patron
Patreon Donor
Armsbend

I’m saying all of those other stocks have recovered – while Activision has not.

I stayed in through the December 24th lows and have done pretty okay because I did stick it out.

Reader
Utakata

Or, tl,dr: The parrot was just resting. >.<

Reader
rafael12104

Because he was nailed there. Heh.

Reader
silverlock

I can’t remember what decade it was but their was a phase where laying off large numbers of employees was just like printing money, the companies stock would get a big increase and the executives would get big bonuses. I guess investors see through that ploy now though.

Reader
Akagi

I have a feeling someone is setting them up to appear as the bad guys in the eyes of the public, I despise them for what they’ve done to their games, but I can’t shake the feeling this is all part of a big plan and not just a circumstamce a la “This is what happens to all big companies”.

Reader
Loyal Patron
Patreon Donor
Armsbend

I think Activision is doing a fantastic job of that themselves. They don’t need any outside influence to make them appear as the bad guys.

Layoffs in the midst of hiring C level guys at borderline insane salaries
Bad marketing decisions
Bad monetiziation (for the consumer)
Lack of innovation and pipeline
Dying IPs

I think the legacy companies are having a really hard time navigating the new free to play model. They get F2P, everyone does by now. I just think this flavor of the month attitude has them in knots. It’s basically what it used to be. You make a hit game. Crap – Now I have to make another hit game. They were enjoying milking one franchise for 15 years they forgot what it was like having to work for a living.

Reader
Bob Smith

its does feel likes there is a full-blown social media war going on. The outrage these days is out of proportion and not comparable to anything in the past.

Reader
Loyal Patron
Patreon Donor
Armsbend

That isn’t how I saw it at all.

Stock price fluctuations can mean any number of things. The revenue/profit numbers were good so it could have gone up because the street was expecting much worse numbers at it’s bottom – so it got a temporary bounce. The firings could have just been cutting fat – esports, marketing, customer service, etc. And many other things.

They didn’t come out, to the best of my knowledge, and say we are firing these people due to the decline in share price. They might have been, but that is just conjecture.

The thing you always have to remember about a stock’s price is that it can have nothing to with the numbers. The share price is ONLY determined by what someone is willing to pay for it. If the stock falls out of favor for any reason it goes down. I think (I know rather) that many of it’s retail (non-institutional) investors are gamers themselves. If those investors suddenly aren’t as enamored with the company any longer and want out – the share price follows downward.

Now on the other side of the coin – the institutional guys – they look at everything more closely. They know the China stuff. They know the brands are falling out of favor. They can see the decline in goodwill. They know WoW, HS, etc are bringing in less revenue. They know their money might do better in a less volatile sector (non-entertainment for example). So they ditch it.

It is back where it started before the announcement. Which makes sense. The company has a lot to prove in the next two years. Are they in decline as a brand? Do they really have anything new besides a panic, “We are working on Diablo promise!” after a marketing disaster?

We’ll see. That’s how I see it.

Reader
rafael12104

Good assessments, Arms. Also cutting the work force is an attempt to cut operating expenses. As such, and irrespective of the stock, the savings will not be realized until the next reporting period.

So, yeah, the stock price lack of movement does mean investors are still hesitant. But if all goes according to plan, cutting opex will bring investors back as next quarters numbers will meet or exceed expectations.

Reader
Loyal Patron
Patreon Donor
Armsbend

I’ve done a relook on the firings and really beside customer service – it seems like something we’d desire – not a bad thing. Esports and marketing getting axed to hire developers? Good riddance esports. Good riddance marketing. That’s what I say.

The problem is that will Activision be able to find the best talent any longer? Or what they really meant is they plan to farm it off in outsourcing. Without being xenophobic, because I’m not, those guys just don’t have the talent that they do in the US. You can’t tell an artist how to paint and it still have the soul of the original artist.

Reader
IronSalamander8 .

Nicely presented. Stock prices are fickle bastards, especially over the last couple of years and it can be hard to pin it down to one event, significant though this is.

Reader
Jim Bergevin Jr

And to add further perspective, the company I work for similarly posted a profitable 2018, and yet has begun a major “restructuring” that is eliminating entire teams across the company, equating to thousands of positions. Some people will be retrained and moved to other positions. Others will not.

Continuing to harp on blizzard for the decisions they make in running their business is getting really tiring. Quite frankly, their reasons for doing so are neither poor nor hideous. It’s actually quite commonplace in the business world.

Reader
Loyal Patron
Patreon Donor
Armsbend

I think it’s different in this business over any other business today. Gamers get tied to these guys. They get tied to the art style, the gameplay. With the proliferation of game specific cons they learn the names and faces of the people who make their entertainment. So when they get axed – they might take it personally. I get that. I get both sides really because I’ve lived in both worlds.

I cannot think of another industry where people are so tied to the makers of what they enjoy. Maybe a publishing house fires a famous writer. Well, okay they will write for someone else who will happily print their book. If Disney fired a super talented animator that might be a big deal – but fans don’t really know the animators/talent as much as they might have known Mel Blanc or Walt himself.

Gaming is different, because they interact with us sometimes we feel like we know them. In a way we do. So when Kotick, a perceived and likely real enemy, cuts huge swaths in the $75K guys but give the Accounting guy $15M? feathers are ruffled. Part of that blame is on them. The timing is poor. It matters because they are entertainment. Exxon can afford to be assholes because no matter how much you hate ’em? You gotta have gas to go. Games? We don’t need them as much as they need us.

ps. that sounds not fun. Hope you survive (if you want to that is).

Reader
Loyal Patron
Bývörðæįr mòr Vas´Ðrakken

if the idea was laying off people resulted in shareholders screaming take money… then it would be fraud.

laying off people to focus on hiring and paying people to create assets that people are willing to pay for takes time. stock is supposed to be held for ten years or more. seeing it drop as people need to pull money out as they reach retirement is horrible but expecting consumers to be less fickle because your investments need to mature now, is just life. I have investments that are supposed to have matured in 2018 I still have no idea what happened there so I have to fly to the UK transfer money from my UK assets to cover construction in Florida, then fly back to the UK and build a foundry or some thing to help Northern Ireland in making sure they have enough money to buy food from places like the USA.

Do I think that activision did the correct thing only ten years time can tell, because you do not measure stock prices in weeks but decades. The way I see it activision blizzard tried to hang on to their art style of cartooney violence and it worked but in doing so something kept getting lost in the process. As other companies focused on rebuilding their game engines activision blizzard reused their game engines knowing that the characters you saw in the last game of name did not have to be that much better. The truth is they were wrong. People wanted better and their imagination was often stunted by the assets that would run in the game engine. The heads kept taking the long view and like branch prediction had trouble with advances in technology. They have talented people that are trying to push their two main IPs modern warfare and wow to do everything and nothing.

The modern warfare maps are too small and while they go out of their way to get rid of snipeʻs nests that players can hide in and making sure that the combat is fluid and the players do not have places to go sit out the match, there is then no nature up swing of tempo and down swing of tempo, only on or off.

Wow is the opposite it is vast and empty but the fear is that players go through the content too fast. What they need and yes I know something, is a open world that has portals into what are smaller but still soaring vistas of adventure lands that in essence are dungeon runs. So that the story line that your character is following is split into two parts. One the building reputation in domain, and building character power and gear by adventuring into the adventure lands filled with random monsters that ebb and flow from week to week. In any case that is something that was not planned to happen before tides of vengeance, even back in 2011. So they hired one the art director from 2077 who characters look appealing and something that the players can identify with, who else did they hire that those dollars freed up pay for? How long before we see two three four maybe more new ips or hundreds of artists trying to get wow up to the modern standard that was six years worth of work at cataclysm days.

The people they are hiring those guys and gals where does their vision take them?

Reader
Bryan Correll

And those institutional investors own 88.59% of ActiBlizz.