April 20, 2018
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Zynga, developer of popular Facebook games, slashes nearly 20 percent of workforce

Player avatars from Zynga's FarmVille 2 are seen on a stairway at the entrance to Zynga headquarters in San Francisco, Calif., on April 23. Zynga announced Monday it would be laying off 520 employees, about 20 percent of the company's workforce.
By Gerry Shih, Reuters

SAN FRANCISCO — Zynga Inc. announced on Monday its biggest ever round of layoffs and warned that bookings will be weaker than previously forecast, raising questions about the social game developer’s attempt at a recovery as it struggles to retain players.

Zynga said it will cut about 520 jobs, or roughly one-fifth of its workforce, and close some offices in the United States.

Analysts said the new financial projections boded poorly for Zynga, the developer of games such as “Farmville,” which began trimming staff late last year and has lost 70 percent of its market value since its 2011 debut.

Zynga’s shares slid as much as 15 percent in frantic trade, before closing down 12 percent at $2.99. Trading had been briefly suspended twice.

The company, a developer of games for Facebook and other platforms, has struggled to retain players and reverse deepening losses as rivals proliferated on mobile devices and the Internet. Zynga has shut studios, retired more than a dozen games and laid off hundreds of employees as it has attempted to turn around.

“I admire them for aligning costs with revenue,” said Wedbush analyst Michael Pachter. “Are they in a state of persistent revenue declines? One quarter doesn’t tell the story, but we need to hear what else they’re doing.”

Zynga’s chief executive, Mark Pincus, acknowledged the company’s struggles in adapting to the mobile world in a memo to employees.

“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 multi-platform, which is where social games are going to be played,” Pincus said.

Zynga said its second-quarter bookings are expected to be in the lower half of the outlook range it provided in April, of $180 million to $190 million. Bookings, which account for the vast majority of Zynga’s revenues, are the sales of virtual goods bought by game players in order to enhance game play, such as the purchase of virtual cows used in farm games.

Zynga does not charge for playing its games. It also derives revenue from advertising.

Zynga said it now sees a second-quarter net loss of between $39 million and $28.5 million, reflecting restructuring charges due to the job cuts. It had previously projected a net loss of $36.5 million to $26.5 million.

The job cuts will save $70 million to $80 million, according to the company.

“None of us ever expected to face a day like today, especially when so much of our culture has been about growth,” Pincus said in the memo to employees. “But I think we all know this is necessary to move forward.

Since its high-profile initial public offering in December, 2011 following a period of runaway growth, Zynga has failed to replicate the success of its early hit titles on the Facebook platform. Gamers are also increasingly spending time on mobile devices, posing a challenge for a game maker that invested so heavily in publishing Facebook titles.

Pincus had acknowledged last fall that he would seek steep cost-cutting measures as Zynga’s business crumbled.

Zynga’s shares are trading more than 70 percent below its IPO price of $10.

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