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Engineering Animation to close two divisions, cut 130 jobs

Engineering Animation Inc. (Nasdaq: EAII) will slash 130 jobs as it shuts down its interactive division.

After market close Tuesdsay, the Ames, Iowa-based software vendor said it will close units that focused on creating 3D animation for gaming, scientific and medical uses. Interactive product development generates about 20 percent of the EAI's revenue, but the business has faced "market instability" in recent quarters, said Matthew Rizai, president and CEO of EAI.

"The games and publishing businesses are going through a period of dramatic change as a result of intense competition, consolidation, changing platform preferences and adapting to the Internet." said Matthew Rizai, president and CEO. "As a developer, we have been feeling the impact of those changes."

EAI's core business of software for storing and viewing product designs remains on target with analyst expectations, Rizai said. That division, which generated about $19.4 million in the first quarter, is healthy, he said.

First Call's survey of five analysts predicts earnings of 21 cents a share in the second quarter for EAI.

Closing the gaming and science divisions means losing 100 full-time and 30 part-time positions, and will be accounted for as discontinued operations in future reports, the company said. EAI will create a reserve to cover the costs of closing those units over the next nine months.

The announcement comes two months after EAI reported a disappointing first quarter. At the time, EAI said it was taking longer than expected to close important sales. "By focusing on our enterprise solutions business, we can best position EAI for future growth and performance," said Marty Vanderploeg, executive vice president and chief technology officer.

Shares of EAI gained 5/16 to 23 1/8 in Tuesday's trading, prior to the latest news. Of six analysts polled by Zack's Investment Research, three maintain the equivalent of "hold" ratings on EAI, two recommend the stock as a "strong buy", and one has a "moderate buy" rating.>