Zynga shares crash below $3.00 as 520 workers are chopped
One-time high-flier on Facebook, games giant Zynga is laying off about 520 employees - 18 per cent of its staff- and closing offices as it tries to cut costs. Shares, $10 at the time of its IPO In December 2011, crashed below $3.00 as the news sank in.
FarmVille.... doin better than the rest
The restructuring is estimated to save about $70 million to $80m. Zynga, whose best-known product is FarmVille, now expects its second-quarter net loss to be between $39 million and $28.5 million.
The San Francisco-based company "s "has struggled to recapture the buzz that propelled its early games and established it as a leader in social titles," said the Wall Street Journal.
As fewer Facebook users tap into games like FarmVille and pay real money for items like digital livestock, Zynga has seen its sales steadily drop.
The company in April posted a surprise first-quarter profit as it trimmed costs significantly, though bookings fell nearly as much.
Zynga's shares, which were halted ahead of yesterday's news, have fallen 43 per cent over the past 12 months.
Zynga chief Mark Pincus wrote to staff,"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."
Pincus said mobile and touch screens were revolutionising 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."
Pincus said that because they were making these moves 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 ."
He said he was 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 22,700 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."