Unity Software
said Wednesday that it plans to cut 8% of its workforce, and some analysts don’t see that as a good sign.
The videogame software developer said it would reduce about 600 employee roles in a filing with the Securities and Exchange Commission on Wednesday.
Unity
(ticker: U) currently employs about 7,700 people.
Unity said the purpose of the reduction is to “position itself for long-term and profitable growth,” according to the filing. The company said it expects to incur about $26 million in charges in the second quarter related to severance payments and benefits.
Oppenheimer analyst Martin Yang wrote Wednesday that the layoffs imply weaker-than-expected sales growth for the second half of the year and reflect management’s focus on improving profitability in 2023.
“Based on the weak macroeconomic backdrop and still challenging mobile ads market, we believe U management will maintain its focus on profit in 2023,” Yang said. “The latest cost actions imply a weaker-than-expected revenue growth outlook for 2H23 and management’s commitment to the prior profit target.” He rates the stock at Perform.
William Blair analyst Dylan Becker wrote in a Wednesday note that the company will still have 7,000 employees after the layoffs, which is more than the 5,000 it had in 2022. Becker, who rates the stock Outperform, is “still well positioned to capitalize on the opportunity ahead.”
Unity is one of many tech companies that has enacted layoffs this year. Tech giants
Alphabet
(GOOGL),
Amazon.com
(AMZN), and
Meta Platforms
(META) have all announced job cuts in 2023 to rein in costs.
IBM
(IBM),
DocuSign
(DOCU),
Autodesk
(ADSK),
Workday
(WDAY), and
Okta
(OKTA) also recently reduced their headcounts.
Shares of Unity were down 1.9% Wednesday to $24.84. The stock has fallen 13% this year. The company is scheduled to report first-quarter earnings on May 10.
Write to Angela Palumbo at [email protected]
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