Zynga is quickly cutting staff and closing offices in order to revamp efforts to focus on mobile games. The social gaming company, which is based in San Francisco, is laying off 520 employees or about 18 percent of its workforce, according to recent reports. It also said it is closing multiple offices.
In a recent blog post, Mark Pincus, CEO and founder of Zynga, called the move “painful” and a “hard day” for the company. But he said it was a necessary one to refocus Zynga on its mobile efforts.
“None of us ever expected to face a day like today, especially when so much of our culture has been about growth,” Pincus wrote. “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.”
Recently, the company’s shares have taken a turn for the worst, plunging about 41 cents, or 12 percent, to $2.99, their lowest price since February. While the move to slash the workforce was a bold one, investors appear unconvinced that it will help right Zynga’s ship.
The newest set or drawbacks is follow layoffs last fall when Zynga cut around 5 percent of its workforce.It also reportedly shuttered four offices earlier this year, including one in Baltimore. According to recent reports, its profit declined in 2012 as its sales growth slowed markedly amid delayed games and disappointing results from new titles. In the first quarter of this year, sales actually fell from the same period a year earlier.
In its announcement, Zynga said the restructuring would save the company $70 million to $80 million before taxes each year. Pincus said the money saved through the layoffs would “offer our teams the runway they need to take risks and develop … breakthrough new social experiences.”
In addition, the company has plans to take a $24 million to $26 million restructuring charge related to the move in the second quarter and a $2 million to $5 million charge in the third quarter. Despite the charges, Zynga reaffirmed its forecast for its second quarter revenue and earnings per share. In April, it predicted it would post a second-quarter loss of 3 cents to 5 cents a share on sales ranging from $225 million to $235 million.
Source: Silicon Valley