Finland's Rovio, maker of mobile phone game Angry Birds, forecast its earnings would fall for a third consecutive year and said it planned to slash up to 39 percent of its workforce to try to improve its prospects.
Rovio has failed to create new hit games since the 2009 launch of Angry Birds, the top paid mobile app of all time, though it has tried to capitalize on its most successful brand by licensing its use on string of consumer products.
The company is pinning its hopes on an Angry Birds 3D movie, due for release in May 2016 and which the company believes will yield new licensing deals.
Sales had been lower than expected so far this year, the company said on Wednesday, forecasting flat sales and falling profits for the full year. It said it was cutting up to 260 jobs, or about 39 percent of the total.
"It is certain that a leaner and more agile Rovio is absolutely necessary to move forward," CEO Pekka Rantala said.
The company said the planned reductions would apply to the whole organization, excluding those working on the movie in the United States and Canada, and most of the cuts will hit its operations in Finland. Rovio already cut 110 jobs in 2014.
The announcement follows similar steps from other gaming companies such as "Farmville" creator Zynga Inc (ZNGA.O) which in May said it was looking to eliminate 364 jobs.
Analyst Steve Bailey from IHS Technology said Rovio's downfall showed how quickly things can turn sour in the fast-paced gaming industry.
"It acknowledges their (Rovio's) failures... It is a gloomy near future for the company, but restructuring makes them more agile and could provide new success stories."
Rovio last month launched a new game, Angry Birds 2, which has been already downloaded almost 50 million times. But analyst Bailey said it takes a longer time to see how a new game can engage players and trigger in-game purchases.
Last year, Rovio's total revenue fell 9 percent to 158 million euros, while operating profit slumped 73 percent to 10 million euros.
(Editing by David Holmes and Keith Weir)