Earlier today during Apple’s revealing of the iPad Mini, Twitter exploded with reports that Zynga had shut down its Boston studio and made massive layoffs to its staff in Austin. These reports have now been confirmed, as company CEO Mark Pincus has written a memo to employees regarding the workforce cuts.
“We are closing the Zynga Boston studio and proposing closures of the Zynga Japan and UK studios,” wrote Pincus. “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 total, Zynga has cut 5 percent of all employees. The teams cut in Austin were behind The Ville and Bingo, which put the titles in serious jeopardy. Zynga Boston, formerly known as Conduit Studios, was behind the Facebook game Adventure World.
Pincus added that 13 “older games” would also be closed and that the company is “significantly reducing our investment in The Ville.” To make matters — and the company’s public image — worse, those who were let go in Austin were given just two hours to pack up their things and leave.
“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,” he stated.
These appear to be the same “targeted cost reductions” that Pincus alluded to earlier in the month when Zynga cut full-year projections on earnings and bookings, then saw a 20 percent drop in stock. Today’s news didn’t help the company’s stocks either, as the day closed with Zynga down over 5 percent to an all-time low of $2.20.
It’s possible the stock drop wasn’t just caused by the staff cuts themselves, but the timing Zynga chose to make them. Acting on the layoffs during Apple’s event has widely come across as a means to bury the news amongst iPad Mini updates. The plan looks to have backfired big time.
You can read Pincus’ entire letter to the Zynga staff below. Be sure to let us know your thoughts on this startling development in the comments section.
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.