Zynga announces NaturalMotion acquisition alongside layoffs
In a push to cut costs, become more efficient, and tread into the mobile market, the beleaguered game maker reveals some big changes with its earnings report.
Looking to bring its wayward financials back on track, Zynga revealed a handful of surprises during its 2013 fourth quarter earnings report on Thursday. While Zynga CEO Don Mattrick announced the acquisition of British gaming company NaturalMotion, he also said the company had to tighten its belt with company-wide layoffs. This comes with news of a 43.3 percent decrease in Zynga's revenue from a year ago.
The acquisition of NaturalMotion shows that Zynga is keen on cornering the mobile gaming market. NaturalMotion is known for popular game apps like "CSR Racing" and "Clumsy Ninja." Zynga will spend $527 million on the acquisition. In return, the company will also get NaturalMotion's co-founder and CEO Torsten Reil.
"NaturalMotion expands Zynga's creative pipeline, accelerates our mobile growth, and brings next-generation technology and tools to Zynga that will fast-track our ability to deliver consumers more hit games," Mattrick wrote in a staff e-mail. "Combining NaturalMotion's strengths with Zynga's ability to develop breakthrough social features while sustaining live games over time, offers us a huge opportunity to redefine the gaming industry and deliver consumers blockbuster entertainment experiences."
While Zynga is adding staff with the acquisition of NaturalMotion, it's cutting employees in other parts of the company. The layoffs come with a 15 percent workforce and cost reduction plan that is expected to save the company as much as $35 million but will impact up to 314 employees. This comes after a massive layoff of 520 workers last June and continuing executive shake-ups.
"We don't take these decisions lightly but we believe these actions will allow us to create a clearer, faster path to win," Mattrick wrote. "On a personal note, these are extremely difficult but important actions that are helping us drive improved results and create a new foundation for future growth."
The staff layoffs are reflective of Zynga's earnings. While the company beat Wall Street's expectations last quarter, it still faced ongoing revenue declines. Zynga lost $25.2 million, or 3 cents a share, on revenues of $176.4 million in the fourth quarter of 2013. This resulted in a 43.3 percent decrease from the same quarter in 2012. Overall for 2013, Zynga lost $39 million on revenues of $873.3 million; in 2012, it lost $209.5 million on revenues of $1.28 billion.
For 2014, Mattrick said his goal for Zynga is to efficiently grow and sustain game hits, as well as create new ones.
"Zynga is getting back to its roots of innovating in social," Mattrick wrote. "We are committed to refining our skills in the art and science of creating new hits and are excited about the mobile market opportunity in front of us."
Originally Zynga's earnings call was scheduled for next week but the company moved it up to coincide with its big announcements.