Zynga to lay off 18% of workforce
Around 520 people to depart by August as cost-cutting drive and shift to mobile development continues " Zynga still reiterates projections for Q2 loss
Zynga said it will lay off 18% of its workforce, with around 520 people to lose their jobs, as it embarks on a series of “substantial cost reductions”.
The redundancies alongside the “closure of various office locations”, thought to include the New York, Los Angeles and Dallas studios, is projected to result in “an estimated $70 million to $80 million in pre-tax annualized cash expense savings”.
According to a statement circulated by the operator, the layoffs will occur “across all functions”, and will be completed by August 2013.
In an email circulated to staff chief executive Mark Pincus spoke of a “hard day” for the company and “an emotional one for every employee”, adding that layoffs “will be felt across every group in the company.”
He explained the redundancies as “necessary to move forward”, calling them a “proactive commitment” to entirely shifting the company’s focus to mobile development.
The size of the company, with over 2,000 members of staff before the layoffs, had made it “hard to successfully lead across mobile and multiplatform, which is where social games are going to be played”.
The news comes after 5% of the operator’s workforce (100 employees) was made redundant in October last year, with Boston, Austin, UK and Japanese studios shut down. This was followed by the closure of its Baltimore studio and offices in New York and Texas being closed in February, with around 30 staff departing.
Following the layoffs, trading in the company’s shares was temporarily suspended, with its stock price dropping 12% to close at $2.99 after trading resumed.
Despite making such drastic moves to reduce costs, the company reaffirmed it expects a net loss “in the range of $39m to $28.5m” in its Q2 earnings after posting a first quarter profit of $4m.
It added that bookings are expected to be “in the lower half of the outlook range” provided in the Q1 results, saying that while the FarmVille franchise continued to grow, “other games are underperforming”.
Earlier this year Zynga filed a 8-K form with the Securities and Exchange Commission, with the firm’s core management team all seeing their salaries almost double.
Chief revenue officer Barry Cottle, president of games Steve Chiang, COO David Ko, CTO Cadir Lee had their basic salaries rise to US$500,000, while executive vice president Reggie Davis and CFO Mark Vranesh’s compensation packages were boosted to $425,000. All will be eligible for cash and equity bonuses of around $1m if certain targets are met over the course of the year.
The move was seen at the time as a bid to avoid an exodus of senior management similar to that of 2012, when the likes of COO John Schappert, chief marketing and revenue officer Jeff Karp, CFO David Wehner, and CIO Debra Chrapaty departing.
Mark Pincus’ email to Zynga employees in full:
To our Zynga Community,
Today is a hard day for Zynga and an emotional one for every employee of our company. We are saying painful goodbyes to about 18% of our Zynga brothers and sisters. The impact of these layoffs will be felt across every group in the company.
None of us ever expected to face a day like today, especially when so much of our culture has been about growth. 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.
These moves, while hard to face today, represent a proactive commitment to our mission of connecting the world through games. Mobile and touch screens are revolutionizing gaming. Our opportunity is to make mobile gaming truly social by offering people new, fun ways to meet, play and connect. 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.
Because we’re making these moves proactively and from a position of financial strength, we can take care of laid off employees. We’re offering generous severance packages that reflect our appreciation for all of their work and we hope this will provide a foundation as they pursue their next professional steps.
Although these are hard decisions, I’m confident that our strategy of building leading franchises and supporting them with the largest network is the right one for the long term. I’m encouraged by our recent progress. Running With Friends is a great example of the quality player experience we can deliver, already receiving an average 4.5 app star rating from 22,000 players in less than one month after launching. Our FarmVille franchise teams continue to innovate and deliver ground breaking new social experiences like County Fair which, despite only being available on the web, is engaging 39 million monthly players.
I want to thank every one of you for the spirit, creativity and energy that you’ve invested in Zynga. You’ve reintroduced a generation of people to gaming and through these games offered them new ways to connect with their families, make new friends and even sometimes find love.
Everyone will be affected by these changes and I’m sure there will be many follow up questions to this email. If you have specific questions relating to your project or team, please talk to your manager. For any other feedback or thoughts feel free to email me directly.
Mark
This story originally appeared on Social Casino Intelligence