Zynga Inc. is cutting approximately 5 percent of its workforce and ending 13 games. The social game developer is also to shut down few of its offices. The reduction plan of Zynga Inc. is expected to compensate for decreasing sales growth.
Cuts at Zynga
The decision on job cuts and closures of offices comes just a moment before Zynga Inc. is to announce its third-quarter earnings report.
In a note to the company's employees Zynga Inc. has informed that an office in Boston was shuted down, the closures of studios located in Japan and the United Kingdom are highly possible as the management is analyzing that possibility. As for the company's studio in Austin, Texas, the job cuts are to be implemented.
The job cuts at Zynga Inc. amount to approximately 150 workers, or 5 percent of its workforce. These days Zynga Inc., which is the social game developer, employs about 3000 workers compared with just 100 a few years ago. Colin Sebastian, an analyst at Robert W. Baird & Co., believes that the job cuts at Zynga Inc. are needed as the company is overstaffed mainly in social gaming.
Apart from the job cuts and closures of offices, Zynga Inc. is said to "sunset" roughly 13 games titles, which have not been yet specified, and drastically cut investment in its latest game "The Ville". According to the company's note, these plans will be implemented alongside with a Zynga Inc.'s stringent budget and a new policy of resource allocation.
Marcus Pincus, chief executive officer at Zynga Inc., noted: "This is the most painful part of an overall cost reduction plan that also includes significant cuts in spending on data hosting, advertising and outside services, primarily contractors."
Zynga 3Q results
Zynga Inc. has scheduled to release its third-quarter results later. Yet the social game developer is expected to report a net loss of approximately $87.4 million on sales of roughly $291.5 million, according to analysts' estimations. A profit of roughly $12.5 million on sales of $306.8 million was reported last year.
But Zynga Inc. has already cut the forecast for full-year bookings due to lower demand for its gaming titles, including "The Ville." Earlier in October the social game developer informed that it expected to report a net loss of loss of $90 million to $105 million for the third quarter of the year.
In addition, Zynga Inc. has noted a sharp decrease in users for some of its most popular social games. In the last month "The Ville" monthly active users fell to about 17.5 million from 26.2 million. Monthly users of Zynga Bingo dropped to roughly 5.4 million from 5.8 million in the last 30 days.
At the time of the announcement of the warning on the third-quarter results Zynga Inc. informed also that it had reduced its expectation for its games such as "The Ville". What is more, the launch of new titles might be delayed.
Shares of Zynga Inc. dropped as much as 5.2 percent to $2.20 at the close on the 23rd of October in New York as news on the possible reduction plan had been circulating .