Zynga Inc. (ZNGA), the biggest maker of online social games,said it will cut 520 jobs, or 18 percent of its staff, and close some officesamid disappointing results from its titles outside the “FarmVille” series.
Michael Pachter, an analyst at Wedbush Securities Inc.,talks about Zynga Inc.'s plan to cut 520 jobs and close some offices amiddisappointing results from online social game titles outside of the"Farmville" series. He speaks with Jon Erlichman on BloombergTelevision's "Bloomberg West."
The reductions will save about $70 million to $80 million inpretax expenses annually, the San Francisco-based company said in a statementyesterday. The cuts will be completed by August and will result inrestructuring charges of $24 million to $26 million in the second quarter and$2 million to $5 million in the third quarter.
Chief Executive Officer Mark Pincus is trimming costs asgame players shift from titles on Facebook Inc. (FB), Zynga’s core business, toapps played on mobile devices. While the cuts may help buoy profits, the moveputs pressure on Pincus to find new sources of growth, said Michael Pachter, ananalyst at Wedbush Securities Inc.
“You can’t save your way to prosperity,” Pachter said in aninterview. “They have to keep innovating.”
Zynga dropped 12 percent to $2.99 at yesterday’s close inNew York, the first time in almost four months the stock has fallen below $3.The shares have gained 27 percent this year, compared with a 15 percentincrease for the Standard & Poor’s 500 Index.
Along with the staff reductions, Zynga is closing itsoffices in New York, Los Angeles and Dallas, said a person familiar with thematter, who asked not to be identified because not all affected workers havebeen notified.