By Malathi Nayak and Gerry Shih
SAN FRANCISCO Jan 30 Zynga Inc will
slash costs in 2014 by shedding 15 percent of its workforce, the
company that developed "Farmville" said on Thursday, adding that
it will bolster its pipeline of new mobile games by buying game
developer NaturalMotion for $527 million, moves that sent its
stock up 20 percent after hours.
The San Francisco-based game company said it expects to cut
314 jobs as part of an expanded cost savings plan. Zynga also
posted a narrower-than expected quarterly loss, and its shares
soared to $4.26 after closing at $3.56 on the Nasdaq.
Zynga said it acquired NaturalMotion, which has created
games like "Clumsy Ninja" for Apple mobile devices, for $527
million in cash and stock in a bid to grow its mobile game
"The missive is kind of the framework of a turnaround," Mike
Hickey, an analyst at the Benchmark Company, said.
In July, Zynga hired the former head of Microsoft Corp's
Xbox business, Don Mattrick, to replace co-founder Mark
Pincus as CEO. Mattrick has been managing a series of layoffs,
cutting costs and reviewing the company's product pipeline.
While the management's recent steps show a "a ray of
optimism," key metrics of user engagement were still weak and
Zynga must prove that it can use NaturalMotion's games and
talent to deliver titles that are longlasting hits in a
fad-driven mobile game market, Hickey said.
"Look at Draw Something....that was something that on the
surface looked great but quickly evaporated," Hickey said.
Zynga had scant success with its 2012 acquisition of OMGPOP,
the New York-based studio that created "Draw Something," for
about $200 million.
Zynga's core business continued to deteriorate, but not as
quickly Wall Street feared. For the quarter ended Dec 31,
Zynga's revenue fell to $176.4 million from $311.16 million a
year prior, compared to analysts' average estimate of $141.1
million, according to Thomson Reuters I/B/E/S.
Excluding certain items, it reported a net loss per share of
3 cents, slightly better than Wall Street view of a 4-cent loss
per share, according to Thomson Reuters I/B/E/S.
The company forecast first-quarter revenue in the range of
$155 million to $165 million, surpassing Wall Street's estimates
of $145.6 million, according to Thomson Reuters I/B/E/S.
The game publisher, once among the hottest tech companies
with rapid revenue growth from popular Facebook-based games, was
caught off guard as the games industry saw a boom in mobile
games. The company has renewed its focus on transitioning to
smartphones and tablet titles, the increasingly preferred format
for casual gamers.
"The guidance for 2014 was strong, even exiting out the
deal, it was in excess of what the Street was looking for and
that shows the stabilization and expected re-growth of their
business," Hickey said.