Electronic Arts in Redwood City, the world's largest video game maker, said it will become smaller, ridding itself of 580 jobs.
That's about 6 percent of its workforce.
Some of those jobs will be shipped overseas.
The company, which makes such hits including Madden football, said though it had to post a $310 million loss for the quarter, it remains optimistic about the growth of video games.
EA officials said their second-quarter net loss widened as development and marketing costs grew.
But revenue surpassed Wall Street's forecast thanks to games like "Spore" and "Madden NFL 09."
EA also lowered its full-year profit outlook range, though it kept its revenue forecast intact.
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Electronic Arts said the $310 million was worth about 97 cents per share.
That was worse than the loss of $195 million, or 62 cents per share, a year earlier.
EA's sales jumped 40 percent to $894 million.
Excluding one-time items, EA says it lost 6 cents a share in the latest quarter, matching the expectation of analysts polled by Thomson Reuters.
Adjusted sales, which exclude deferred revenue for some online games, were $1.13 billion, beating expectations for $1.08 billion.