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Amidst digital gaming push, EA loses staff to Zynga and other Valley companies

By Kate Abbott | 7 Mar 2012

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Sims Social is EA's most successful game for social media platforms like Facebook. (Image courtesy of ea.com)

The movement of employees from company to company in the Valley is nothing new. But these days, the so-called “talent wars” appear to be heating up in the gaming world.

The latest example is the departure of Chief Financial Officer Eric Brown from Electronic Arts, Inc. (NASDAQ: EA). Brown announced his resignation after four years with the gaming giant on Feb. 4, according to papers EA filed with the Securities and Exchange Commission three weeks ago. Brown assumed the positions of CFO and Chief Operating Officer at Polycom, Inc., a videoconferencing firm also located in the Valley on Feb. 21.

The circumstances surrounding Brown’s departure may not be the same as other Valley executives caught in talent wars. Sources say that Brown, 46,  whose compensation package was about $3 million, left EA in search of a “more operational role.”

Last year, EA also lost Barry Cottle, former head of EA Interactive, to rival gaming company Zynga, Inc. Indeed, according to a Business Insider article, Zynga hired—or “poached”— over 200 EA employees before going public last December. LinkedIn statistics indicate that Zynga saw employee growth from February to December 2011, with a substantial spike from 72 to 91 percent beginning in August to the end of the year. By comparison, EA also saw employee growth, though at a rate under 20 percent, over this same period of time. EA currently employs over 7,000 people, to Zynga’s 2,000 employees.

In addition to Cottle, Zynga lured away former EA Chief Operating Officer John Schappert.  He was reportedly a big proponent of social gaming while still at EA. Business Insider speculates he may be in the running to become Zynga’s next CEO. Former EA Vice President Mark Skaggs has worked for Zynga since 2008.

 Job swapping wide spread

According to a columnist from Forbes last June,  more Silicon Valley  companies are raising salaries and providing other incentives in order to retain employees. Robert Greene, CEO of GreeneSearch, Inc., a technical recruiting firm in the Valley, said that a lot of engineers are changing jobs because of financial opportunities, but that moves have been happening for some time.

“Most engineers don’t leave Google, because they’re technologically challenged and paid well,” Greene said. He explained that due to a shortage of engineers in the Valley, starting salaries are on the rise, to the tune of $100,000 to $150,000.

“Start-ups have to pay really well, because you can’t get people at a discount,” he added. He said he thought companies such as Google were overpaying in order to retain employees.

In the case of EA’s employment changes, Greene speculated that engineers at the gaming company weren’t receiving competitive salaries, and that many wanted to cash in on an IPO at a place like Zynga, where starting salaries for engineers are reported to be upwards of six figures.

Data from startup Top Prospect, a referral company for the Silicon Valley, analyzed the ratio between employee hires and losses over the last two years among prominent technology companies. It found that many of the Valley’s tech companies, including Google, Facebook, and LinkedIn, are exchanging employees.

Zynga’s hire-to-loss ratio is eight-to-one, according to the analysis. EA was not analyzed. The  report illustrates that no Valley tech company seems to be immune to talent losses, though many of them continue to grow.

“It’s not quite what it was like during the dot-com boom, but there are certainly people moving here,” Greene said. “There’s a general shortage of engineers, and that’s because startups and big companies are hiring. We’ve reached the tipping point.”

Social focus

According to an EA spokesperson the company is acquiring new talent to replace some of its former staff, and combining this with a renewed focus on its social and digital initiatives. For instance, many of its new games, such as Battlefield 3, have a mobile group and a social group.

EA Chief Creative Officer Richard Hilleman recently told the blog VG24/7 that EA was “aware” of social gaming despite not catching on early.

“A lot of the early Zynga employees are actually ex-EA employees,” he told the blog during a Feb. 27 Q&A session. “In fact, it’s almost disproportionate. It looks like an EA satellite operation sometimes.”

“Transition is a normal part of business, especially in the Silicon Valley,” John Reseburg, senior director of corporate communications at EA, wrote in an email. “While we have had some departures over the last year we also have brought in a number of talented individuals who will add to our already strong management team, including our CTO Rajat Taneja, Mark Tonnesen as senior vice president and chief information officer, and Executive Vice President of Digital Kristian Segerstrale.”

Taneja, a former corporate vice president of Microsoft Corp., oversees global technology and investments. In a press release dated Feb. 8, EA said  “Taneja is assembling a team of engineers and technologists responsible for creating a technology structure for our games, services, customer information and much more.”

Segerstrale co-founded Playfish, a social-gaming site, which was acquired by EA in 2009. EA announced on Feb. 8 that Tonnesen would be joining the company from security firm McAfee.

Additionally, weak earnings across the video gaming industry coupled with Zynga’s recent quarter’s performance, which only narrowly beat analysts’ expectations,  means nothing in this sector is guaranteed.

Stanford senior Nate Adams, a psychology major and long time video game enthusiast and curator of a gaming blog called “Nate of Play,” said he viewed EA as an attractive potential employer and believed EA would bounce back.

“Zynga’s games are a means to an end,” Adams said. “They’re things people do in a connected space, like Facebook.”

He said that EA would ultimately benefit form breaking into the digital gaming realm because it already has a solid reputation for its console games.

“It makes sense that talent is moving in the Bay Area now, but it’s not feasible that this will continue,” he said. “[Zynga] is limited by social media and those kinds of platforms.”

EA acquired Seattle-based PopCap Games last year for $650 million in cash plus $100 million in stock, an indication of its desire to directly challenge Zynga’s dominance in social media platforms, namely Facebook. Though Zynga-produced Farmville and others dominate Facebook’s top games, EA has broken into the top with Sims Social.

“We have re-aligned our organization and made key acquisitions in order to better position EA from both a management and development standpoint to drive digital growth across the breadth of our business,” Reseburg said. “Over the last few years we have made significant changes to the entire organization in order to manage costs, narrow our focus on fewer but higher quality titles and to grow the universe of content we have around EA’s key franchises in new digital channels.”

“The reality at EA today is that everyone and everything is digital,” Reseburg said.

Reseburg said that there “currently is no timeline for naming a new CFO.” Kenneth Barker, EA’s chief accounting officer, has been appointed CFO for the interim.

Though  investors were displeased with Brown’s departure — EA’s stock dropped over 4 percent in after-hours trading the day of the announcement — the company is emphasizing its digital focus as a promising future, announcing this week a new game for iOS based on television show “The Simpsons.”

EA’s 52-week stock range is from $16.05-$26.13 and has hovered around $17 in recent weeks.

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