Zynga will shutter its Boston studio and is proposing closures of studios in Japan and the United Kingdom, says founder and CEO Mark Pincus in an internal memo to employees. Approximately five percent of Zynga's workforce will ultimately be affected by the cuts.
Thirteen Zynga games will also be shutting down, Pincus says, with the company "significantly reducing" its investment in underperforming social game The Ville. The company's Austin studio is also undergoing staff cuts, further confirming previous reports.
"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," Pincus writes, explaining that the cuts, combined with "more stringent budget and resource allocation" are aimed at increasing Zynga's slipping profitability.
Zynga said it expects to post a $90 million to $150 million loss for its most recent quarter. It lowered its yearly earnings outlook twice in the past three months, citing weakness of titles like The Ville and challenges on the Facebook platform. The mobile and social games publisher plans to announce its third quarter earnings on Oct. 24.
In early October, Pincus heralded the sweeping, company-wide cuts in a preliminary earnings statement, saying Zynga will be "implementing targeted cost reductions in the fourth quarter and rationalizing our product R&D pipeline to reflect our strategic priorities."
Pincus' letter to employees is below.
Earlier today we initiated a number of changes to streamline our operations, focus our resources on our most strategic opportunities, and invest in our future. We waited to share this news with all of you until we had first spoken with the groups impacted.
As part of these changes, we've had to make some tough decisions around products, teams and people. I want to fill you in on what's happened and address any concerns you may have.
Here are the most important details.
We are sunsetting 13 older games and we're also significantly reducing our investment in The Ville.
We are closing the Zynga Boston studio and proposing closures of the Zynga Japan and UK studios. Additionally, we are reducing staffing levels in our Austin studio. All of these represent terrific entrepreneurial teams, which make this decision so difficult.
In addition to these studios, we are also making a small number of partner team reductions.
In all, we will unfortunately be parting ways with approximately 5% of our full time workforce. We don't take these decisions lightly as we recognize the impact to our colleagues and friends who have been on this journey with us. We appreciate their amazing contributions and will miss them.
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.
These reductions, along with our ongoing efforts to implement more stringent budget and resource allocation around new games and partner projects, will improve our profitability and allow us to reinvest in great games and our Zynga network on web and mobile.
Zynga made social gaming and play a worldwide phenomenon, and we remain the industry leader. Our success has come from our dedication to a simple and powerful proposition - that play is not just something people do to pass time, it's a core need for every person and culture.
We will all be discussing these difficult changes more with our teams and as a company. Tomorrow, Dave and I will be hosting a post-earnings webcast (details to follow) and next week we will be discussing our broader vision and strategy during our quarterly all-hands meeting. I'm confident this puts us on the right path to deliver on the promise of social gaming and make Zynga into an internet treasure.
If you have any immediate questions, I hope you will talk directly with your manager, Colleen, or me.
I look forward to talking with you tomorrow.
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