Zynga announced that it will reduce its work force by 18% and exit the sports video game category to streamline its business and improve the quality of its games. After making all the changes, the social game maker expects to cut its annual costs by $100 million.
Zynga exits sports category
On Tuesday, the San Francisco-based company said 364 people will be laid off and the data center used for its games and other computing needs will be closed. The plan was revealed during the earnings call, on which Mark Pincus announced his first move after returning as chief executive to replace Don Mattrick, who worked for two years to revive Zynga by shifting the company’s focus to mobile games and entering new game categories like sports. In a phone interview with The NY Times, Pincus applauded Mattrick, noting his efforts to make the company a “contender in mobile.”
Pincus noted that the company needs to focus on a few things, adding that there are plenty of great opportunities lying ahead, and the team needs to focus more on these opportunities. Pincus said Zynga will abandon its NFL game and cancel a Tiger Woods golf game under development. Additionally, the development studio in Orlando, Fla. will be scrapped. The prior plan of releasing up to 10 games this year will now be reduced to between six and eight.
Zynga needs better games
Pacific Crest Securities analyst Evan Wilson noted that the social game maker is bringing down costs, but these actions will not help it make better games. For the first quarter, Zynga posted income of $46 million,or 5 cents per share, compared to a loss of $61 million, or 7 cents per share during the same period last year. The company’s revenue surged to $183 million from $168 million.
Pincus feels Zynga should move towards enhancing its technology investments in various areas such as data analytics. Data has become an integral part in studying player behavior, thus helping to modify games to increase the time and money spent by each user. Pincus said the company is not inclined to run its own data centers and that it could transfer this operation to Amazon.
