By Sarah E. Needleman
Just weeks after returning to the helm of the company he
founded, Zynga Inc. Chief Executive Mark Pincus is slashing nearly
a fifth of the videogame company's workforce to focus on making
fewer, higher-quality games.
The announcement Wednesday of steep job cuts came as Zynga
showed progress in turning around its business. The company moved
up its scheduled earnings release by a day, reporting a 9.1% gain
in revenue and a narrower loss than what Wall Street had expected.
It also forecast a second quarter that is slightly stronger than
analysts' projections.
Zynga said it is eliminating 364 employees, or about 18% of its
workforce. It is one of the first strategic decisions from Mr.
Pincus since he returned in early April to take over from Don
Mattrick, the former Electronic Arts Inc. and Microsoft Corp.
executive that Mr. Pincus handed the top job to barely two years
earlier.
The job cuts will come from several areas world-wide. Zynga
expects restructuring charges of between $18 million and $22
million in the second quarter.
The eliminations are expected to be completed before the end of
the year, the company said, generating annualized savings of about
$45 million before accounting for the charges. Another $55 million
in annualized savings will come through other belt-tightening
measures, such as eliminating outside vendors and trimming data
centers, by the third quarter of 2016, Zynga said.
In an interview, Mr. Pincus said Zynga simply was trying to do
too many things. It plans to shrink its stable of games to focus on
a few popular areas like casino, racing and casual. One victim is
sports, a category that launched less than a year ago.
"We just have been spread too thin and pursued to many things,"
said Mr. Pincus. "We haven't done great job of funding our best
opportunities...so we're addressing that."
One of those opportunities is action-strategy games like
Supercell Oy's "Clash of Clans" and Machine Zone Inc.'s "Game of
War: Fire Age"--a gaping hole Zynga's mobile portfolio. Earlier
this week, Zynga released the military-strategy game "Empires &
Allies," which borrows its name from one of the company's past hits
on Facebook.
"The level of quality and polish in game design that it takes to
be competitive in mobile today is just very different than it was
years ago, " Mr. Pincus said. He said it took less than three
months to make one of Zynga's first hits, "Mafia Wars" for PCs.
"Empires," meanwhile, spent two years in development.
Despite being late to the party, getting a strategy game out the
door is just one piece of Zynga's plan to become a force in mobile
gaming and return to profitability. That slow march to turn the
corner continued in the first quarter. Zynga reported a loss of
$46.5 million, or 5 cents a share, compared with a loss of $61.2
million, or 7 cents a share, a year earlier.
Excluding certain items, it reported a loss of a penny a share,
the same as a year earlier but narrower than the per-share loss of
2 cents expected by analysts surveyed by Thomson Reuters.
Revenue climbed to $183.3 million, ahead of the $147.7 million
expected by analysts, according to Thomson Reuters. Zynga said
mobile accounted for 63% of the $167.4 million in bookings--the
amount of money spent on games--in the quarter.
For the second quarter, Zynga expects revenue of between $175
million and $190 million. Wall Street was looking for $156 million,
according to Thomson Reuters, which would have been slightly better
than a year earlier.
The company still expects another net loss, of between $54
million and $50 million, in line with Wall Street's forecasts. In
the second quarter of 2014, Zynga had a loss of $62.5 million.
Write to Sarah E. Needleman at sarah.needleman@wsj.com
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