Two different and contrasting news items from San Francisco-based companies reveal why the city should not frame laws and encourage an environment suited only to the City’s booming technology sector, says a report from the San Francisco Examiner.
Zynga’s Layoffs
Zynga Inc (NASDAQ:ZNGA) recently laid off 520 workers, equaling 18 percent of its workforce. Along with the massive layoffs, the social-game developer headquartered in the south of Market Street closed offices in Dallas, Los Angeles and New York.
The news of the layoffs from the game maker comes a week after San Francisco’s new city and county budget referred to Zynga Inc (NASDAQ:ZNGA) as one of the tech leaders that helped the local economy come out of the Great Recession.
The gamemaker’s revenue has been on the decline for quite some time now, and layoffs were necessary considering its weak balance sheet. For the first quarter this year, revenues decreased by 18 percent versus the same quarter for 2012. The slow transformation of the company from desktops to mobile, and reduced dependence on Facebook Inc (NASDAQ:FB) are considered as the main reasons for the current plight for Zynga Inc (NASDAQ:ZNGA).
Salesforce.com’s Biggest Acquisition to Date
In separate news, Salesforce.com (NSYE:CRM) made its biggest acquisition to date by acquiring ExactTarget for $2.5 billion. The acquisition will help Salesforce.com to better serve its clients including Toyota Motor Corporation (NYSE:TM).
Lesson Learned
Both contrasting news, one from Zynga Inc (NASDAQ:ZNGA) and the other from Salesforce.com, underscore the fact that tech companies are a not a stable platform for any city to base their economy on. The technology industry is highly varied and has so many different types of companies that concluding on the health of the industry overall becomes a difficult task.
After their recent troubles, both Zynga Inc (NASDAQ:ZNGA) and Facebook Inc (NASDAQ:FB) have learned not to rely on one single platform. The same lesson must also be followed by the city government that it may be risky to rely on a particular industry. Therefore, local authorities must create an environment where companies belonging to diverse sectors can thrive.
Like a good share portfolio, which reduces its risk by investing in numerous companies, San Francisco government should also encourage diversification of industries. The growth from such diversification will be much stronger as more jobs will be created for employees from all backgrounds and education levels.
