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Zynga lays off 18% of staff to 'narrow and intensify our execution focus'

Today, a beleaguered Zynga announced its latest financial results -- the first after it said goodbye to CEO Don Mattrick.

Today, a beleaguered Zynga announced its latest financial results -- the first after it said goodbye to CEO Don Mattrick. For the three-month period ending March 31, it increased its "bookings," or revenue from its games -- which is how the free-to-play industry measures itself -- slightly year-on-year, from $161 million to $167 million.

63 percent of those bookings were on mobile -- up 84 percent year-on-year.

However, the company still showed a loss -- $6.7 million for the quarter, a bigger loss than the comparable period last year, which was $6.3 million.

The biggest news, however, is that the company has announced plans to shed a large number of staff: 364 people, or approximately 18 percent of its workforce. The company is closing its Orlando, Florida studio in this move. CEO and founder Mark Pincus told Re/code that these layoffs mainly affect central services and corporate, with an aim at “de-layering and de-cluttering the organization.”

On its investor call, CFO David Lee said this change was aimed at "simplifying our organization and returning to an entrepreneurial environment."

Why slim down the game catalog?

The company has also "narrowed" its focus down to five game genres: Action Strategy, Social Casino, Invest and Express, Casual, and Racing. A year ago, the company announced plans to expand its genre offerings. In fact, the company is exiting the sports category, and the company will cease developing and supporting NFL Showdown and Tiger Woods Golf.

Lee said that this narrowed focus will help the company "capitalize on the advantages of category depth" -- brand recognition and a large player base in the categories Zynga operates in.

In the investor call, Pincus expanded on this further: The goal is to "Narrow and intensify our execution focus around the big opportunities that are in front of us today," he said. "We've been surrounded by too many opportunities as a company and it's been historically too hard for us to get to a narrow enough focus."

That explains the plan to back away from potentially lucrative sports titles: "We don't want to pursue sports at the expense at near term more obvious opportunities," Pincus said. 

In the future, Zynga will approach new games this way: with "more small teams to get out ahead of us and pursue new innovations, but we want to be careful about when we step up investment in those teams. We don't want to find ourselves in the middle. We want to be pursuing proven opportunities in proven categories with proven teams, or we want to have very small teams out proving a new opportunity."

Pincus' personality as CEO

Pincus, Zynga's original founder, sometimes cut a controversial figure as CEO -- so his comments on the call that he'd bring a more measured management style to the company while restoring it to an "entrepreneurial" bent were interesting:

"I think that some of what I brought to the job in the first six-and-a-half years I hope to bring back here -- a real focus on entrepreneuring and bringing a real energy to everybody, game-makers, to every part of the company and a founder can do that in a unique way.

"But at the same time I'd like to bring some greater patience than what I brought, where we were kind of in a series of sprints, it felt like weekly sprints that went on for six-and-a-half years as we built the company, and I'm working with the leadership team on a different cadence that reflects where the company is today ..."

Pincus' internal email

Gamasutra has also obtained Pincus' internal email to staff regarding the layoff, and reproduces it below:

Team,
 
I wanted to share that today, along with our Q1 earnings results, we announced a cost reduction program which will enable us to focus and align against our best opportunities.
 
We need to be more resourceful in how we manage our costs in order to fund our investments in great new games and data analytics. We’ve over-burdened our game teams with complexity and centralized expenditure.
 
We expect these cost reductions to generate $100 million dollars in annualized savings. We are reducing our workforce by 364 people or approximately 18 percent, closing our Orlando game studio, decreasing our outside services and reducing our central functions.
 
I wanted you to hear this news from me first as we will be notifying impacted employees today. I know everyone will join me in supporting all of our employees who were affected.
 
Days like today are difficult. I know it’s hard to say goodbye to talented teammates who have contributed to our mission and delivered value for our players.
 
Please join me for a 30 minute All-Hands today at 5 pm PDT in the Café, where I will host an open Q&A. We’ll also send out my Earnings prepared remarks prior to the meeting so you can read them in advance. If you have questions about today’s news please feel free to ask them at our All-Hands or send them to Dani [address redacted] and I’ll read your anonymously submitted questions.
 
We’ll be making the All-Hands available via vidcon to all studios outside San Francisco. Additionally, Marcus and I will be hosting follow-up vidcon meetings tomorrow night at 8:30 pm PDT for Studio-I and Friday morning at 9:30 am PDT for our UK studios – details to follow.
 
If you have specific questions related to your project or team please feel free to reach out to your manager.
 
Mark

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