News Column

Zynga Announces More Layoffs

June 4, 2013

Beleaguered game maker Zynga zapped 520 jobs Monday in a deep cost-cutting move that increases questions about its future.

The company, based here, said it will lay off 18% of its workforce worldwide and shutter offices.

Zynga declined to say where but sources, who asked not to be identified, said the locations are in Los Angeles, Dallas and New York. Zynga says the move, which should be completed by August, will save it $70 million to $80 million.

Zynga on Monday said it anticipates a second-quarter loss of $28.5 million to $39 million.

The news sent Zynga shares tumbling 12%, to $2.99 -- far below its IPO price of $10 a share.

"None of us ever expected to face a day like today, especially when so much of our culture has been about growth," Zynga CEO Mark Pincus said in an e-mail to employees on Monday. "But I think we all know this is necessary to move forward.

"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.

The largest layoff in the nearly six-year history of Zynga is its latest blow. The company has endured player defections, increased competition amid slumping revenue and the elimination of 18 titles in the past six months. Last fall, Zynga announced about 150 job cuts.

That has caused Zynga to focus more on mobile and so-called midcore games in hopes of changing its course. Zynga defines midcore as games that "blend the depth of hard-core games, traditionally played on a PC or console, with the approachability and accessibility of casual games that are mobile, free-to-play and social," says Steve Parkis, senior vice president of games, midcore.

"The market for mobile gaming is morphing in super-quick cycles, and companies in the space can get whipsawed as a result of it," says P.J. McNealy, CEO of Digital World Research. "Zynga's layoff news, again, is clear evidence. It's also clear that this won't be the last round of layoffs."

While Zynga struggles to maintain users, the number of people in the U.S. who play games online, on their phones or through social networks continues to grow. That figure is expected to grow 5.6% to 80.3 million this year, according to eMarketer.

"By reducing our cost structure," Pincus said in the e-mail, "we will offer our teams the runway they need to take risks and develop these breakthrough new social experiences."

Source: Copyright USA TODAY 2013

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