- EA is planning a series of annual cuts to scale down spending by around $700 million.
- The cuts come after the company's $55 billion buyout by a Saudi-led investment fund.
- Since EA's debt from the buyout is larger than its yearly income, the company will be cutting down on spending wherever it can.
Rumor has it that the top executives at EA are planning a wave of annual cuts after reportedly informing debt investors of its intent to slash up to $700 million in annual costs. This might lead to the publisher’s workforce being scaled down after the recent acquisition by a Saudi-backed investment fund.
The budget cuts come on the heels of EA’s massive $55 billion buyout led by Saudi Arabia’s Public Investment Fund (PIF) alongside private equity firm Silver Lake and Jared Kushner’s Affinity Partners. This ended EA’s 36-year-long run as a publicly traded company on the NASDAQ. However, this comes with a massive catch: a whole lot of debt.
Commenting on the situation, Bloomberg’s Jason Schrier stated: “EA’s annual EBITDA is around $1.5 billion, which should be enough to service the interest payments. But the publisher has told debt investors that it will cut $700 million in annual costs, including $170 million in ‘organizational efficiencies,’ per Bloomberg. In other words: mass layoffs.”
To execute the massive deal, the buying group has loaded Electronic Arts down with about $18 billion in debt. This means the company has to pay roughly $1.8 billion every year just on interest. Since the annual interest payment is higher than the company’s yearly earnings (apart from the CEO bagging a hefty bonus), EA is looking to save cash in any way it can; thus, the annual cuts.
This means that the trend of mass layoffs, which has already impacted Xbox this year, is unfortunately continuing after this new transition. With EA settling into its new role as a privately traded company, players can only hope that these massive financial changes and budget cuts don’t affect the developers too strongly.
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