June 4, 2013
Social Game Maker Zynga Slashes More Than 500 Jobs To Save Money
redOrbit Staff & Wire Reports - Your Universe Online
Online social game maker Zynga Inc. announced on Monday that it is slashing 520 jobs, or about 18 percent of its workforce, and closing certain office locations as the beleaguered company seeks to cut costs.The San Francisco-based maker of games such as “FarmVille” and “Words With Friends” said it expects most of the restructuring to occur by August, and that the move will save about $70 million to $80 million per year.
The company said it would record pre-tax restructuring charges of $24 million to $26 million in the second quarter, and $2 million to $5 million in the third quarter.
It also now expects a worse loss in the second quarter — between $39 million and $28.5 million — than it previously projected, along with weaker bookings that will slow future revenue. It had previously projected a net second quarter loss of $36.5 million to $26.5 million.
"None of us ever expected to face a day like today, especially when so much of our culture has been about growth," wrote Zynga CEO Mark Pincus in an e-mail message to employees on Monday. "But I think we all know this is necessary to move forward.”
The restructuring is the largest layoff in Zynga´s nearly 6-year history.
"The scale that served us so well in building and delivering the leading social-gaming service on the Web is now making it hard to successfully lead across mobile and multiplatform, which is where social games are going to be played,” Pincus said, as cited by USA Today.
Zynga has struggled in recent months to regain the success that drove its early titles and established its dominant position in online social gaming. Although the company posted a surprise first-quarter profit in April as it trimmed costs dramatically, bookings fell nearly as much.
Zynga said that its FarmVille franchise continues to perform well, but other games are underperforming and newer games have failed to gain traction.
The company´s sluggish financial results are due, in part, to increasing competition and declining Facebook exposure, which have led to the elimination of 18 titles in the past six months.
News of Zynga´s restructuring caused its stock to plunge 12 percent, to $2.99, on Monday after trading was halted twice during the day.
Shares of Zynga´s stock have already fallen 43 percent over the past 12 months, and are now far below their IPO price of $10 per share in December 2011.