By Malathi Nayak and Gerry Shih
SAN FRANCISCO Jan 30 Zynga Inc will
shed 15 percent of its workforce to slash costs and buy mobile
game developer NaturalMotion for $527 million to refresh a
stalled games pipeline, moves that sent its stock soaring 20
percent in after-hours trading.
Chief Executive Officer Don Mattrick, hired last year, is
taking aggressive action to revive a company that developed
"Farmville" and once dominated gaming on Facebook Inc's
social network, but is now struggling to adapt to the rise of
Zynga's largest acquisition to date, NaturalMotion is a
12-year-old studio that has created games like "Clumsy Ninja"
for Apple Inc mobile devices. NaturalMotion is known
for its Euphoria game engine, whose simulation technology has
helped create powerful visuals in games like "Grand Theft Auto
"NaturalMotion significantly expands our creative pipeline
and accelerates our mobile growth," chief operating officer
Clive Downie said in an interview. "They are not an acquisition
to fill a gap but one to expand our capabilities."
In July, Zynga hired Mattrick, the former head of Microsoft
Corp's Xbox business, to replace co-founder Mark Pincus
as CEO. Mattrick has been busy managing a series of layoffs,
cutting costs and reviewing the company's product pipeline.
The San Francisco-based game company said in a statement on
Thursday it expects to cut 314 jobs. It also posted a
narrower-than expected quarterly loss.
"The missive is kind of the framework of a turnaround," said
Mike Hickey, an analyst at the Benchmark Company.
While the management's recent steps show "a ray of
optimism", key metrics of user engagement were still weak,
Hickey said. Zynga has to prove that it can use NaturalMotion's
games and talent to deliver titles that are long-lasting hits in
a fad-driven mobile game market, he said.
The analyst pointed to the example of "Draw Something", a
game Zynga acquired when it bought New York-based studio OMGPOP
in 2012 for about $200 million. "Look at 'Draw Something'...that
was something that on the surface looked great but quickly
evaporated," Hickey said.
Zynga, 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
Zynga's core business continued to deteriorate last quarter,
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.
Excluding certain items, it reported a net loss per share of
3 cents, a penny better than forecasts for 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.
"The guidance for 2014 was strong...it was in excess of what
the Street was looking for and that shows the stabilization and
expected re-growth of their business," Benchmark Company analyst
Zynga's shares soared to $4.26 after closing at $3.56 on the