Zynga to Cut 520 Jobs Amid Performance Woes

View Comments ()
|
Email
|
Print

    NEWSLETTERS

    Getty Images
    FILE PHOTO: The Zynga logo is displayed on the front of the company's former headquarters on December 9, 2011 in San Francisco, California.

    Online game maker Zynga Inc. said Monday that it is cutting 520 jobs, about 18 percent of its workforce, in a cost-saving move designed to help it adapt to consumers shifting game play from computers to mobile devices.

    Zynga said it expects the move to save about $70 million to $80 million in annual costs. But the San Francisco-based company behind "FarmVille'' and "Words With Friends'' also now expects a worse loss in the second quarter than it previously anticipated, as well as weak bookings, which will weigh on future revenue.

    Netflix Seeks to Remain in Los Gatos

    [BAY] Netflix Seeks to Remain in Los Gatos
    Netflix is seeking to remaing in Los Gatos, but hasn't yet secured permits for a larger structure within the city limits. Scott Budman reports. (Published Monday, Jun 3, 2013)

    Zynga's stock plunged 12 percent to close at $2.99 on the Nasdaq stock market after trading was halted twice on Monday. Its shares have traded below $4 since about July 2012, after debuting at $10 in its December 2011 initial public offering.

    The cost-cutting, which also includes some office closures, is "proactive'' and done from a position of financial strength, Zynga CEO Mark Pincus said in a blog post.

    "By reducing our cost structure today we will offer our teams the runway they need to take risks and develop these breakthrough new social experiences,'' he said.

    Zynga said it now expects a net loss in the quarter through June of $28.5 million to $39 million, worse than its estimate for a net loss between $26.5 million and $36.5 million it predicted at the end of April.

    It also said bookings, which reflect in-game purchases of virtual goods, would come in at the lower end of its previously estimated range between $180 million and $190 million.

    Analyst Michael Pachter of Wedbush Securities said investors are more concerned about lackluster revenue than any savings from the cuts.

    "You can't save your way to prosperity,'' he said. "The market is telling you that it's not confident that revenues are going to grow.''

    Before the announcement, analysts polled by FactSet were already forecasting that annual revenue for Zynga would shrink to $944 million by the end of the year, down from $1.28 billion in 2012.

    The cuts come on the heels of earlier efforts to reduce overhead as demand for its games on the social-networking site Facebook fades and more people shift to playing games on mobile devices, where the company finds it more difficult to generate revenue.