Unity Likely to Reduce Workforce, Drop Services and Reduce Office Footprint


Unity had its investors call yesterday Nov 9th 2023 (Nov 10 morning Japan time) and the new interim CEO, Jim Whitehurst (ex-IBM/Red Hat) has disclosed its current view of the business situation.

First, looking at the financials, the revenues are still growing, but the recent growth seems to be somewhat saturating:

Looking at the losses in the appendix, the story is pretty much the same, with clearly increasing revenues in 2023, but also increasing expenses in many areas. In the first 9 months of 2023, Unity is bleeding less money (net loss) than the first 9 months of 2022, but still almost half a billion dollars are gone down the drain.

The positive thing is that they seem to have reined down costs in Q3 2023 compared to Q3 2022, so they may be a on better path towards eventual profitability. The biggest culprits for the costs seem to be a huge increase in Sales and Marketing, as well as a little increase in R&D costs.

Based on this outlook, Jim Whitehurst has this to say in the first part of the investors report:

However, we are currently doing too much, we are not achieving the synergies that exist across our portfolio, and we are not executing to our full potential. We aim to address these opportunities to emerge as a leaner, more agile, and faster growing company. We will share specifics as plans are finalized over the next few months.

It goes on later on to mention the key directions for improving performance:

Regarding the increase of fees related to the Unity runtime, they expect that they won’t make much revenues from it in 2023 since the plans have been watered down and delayed to a later date but expect nonetheless more revenues from this source in 2024:

While we did not expect the introduction of the fees to be easy, the execution created friction with our customers and near-term headwinds. We expect the impact of this business model change to have minimal benefit in 2024 and ramp from there as customers adopt our new releases.

Now, when it comes to company interventions, when you read the words “leaner”, “more efficient” or this kind of corporate speak, you know that this means there is going to be some more drastic cut in the expenses, including the obvious one: the workforce. As you can see from the below quote:

Several weeks ago, we started a comprehensive assessment of our product portfolio to focus on those products that are most valuable to our customers. We are also evaluating the right cost structure that aligns with the more focused portfolio. We are acting quickly and expect to make final decisions over the next few weeks. We expect to start implementing the plan within this quarter and expect to complete all interventions before the end of the first quarter of 2024. This will likely include discontinuing certain product offerings, reducing our workforce, and reducing our office footprint.

It looks like they plan to implement these cost-reduction measures within Q4, including layoffs and the reduction of services, and this would be completed before January 2024.

This may be a sad, jobless Christmas for some of the current Unity employees. All the best to those who may be impacted by such measures.