updated 05:50 pm EDT, Tue October 23, 2012
Costcutting measures attempt to bring company back to the black
Zynga's senior vice president of games Todd Arnold arrived at the game manufacturer's Boston office, and closed it down today, leaving 50 people looking for work. Additionally, in parallel at the Zynga studio in Austin, TX approximately 50 more employees were asked to leave. The layoffs occurred during the Apple press event, with speculation that it was done to try and hide the news from the press. Austin-managed Zynga title "The Ville" is being handed off to maintenance employees in the India Zynga office. Titles under development at the Boston studio will not be worked on any further or see release.
According to a report at TechCrunch "Pincus wants to be able to say that the company’s profitable but that’s harder as revenue goes down," said a former employee. "They’re doing short-term things that don’t make any sense at all if you’re thinking about this being a stable company with $1.6 billion in cash in the bank."
Electronista spoke with a former employee who verified the layoffs in Boston and Austin, and added that there were probably "more than a dozen, less than 20" employees in Zynga's Chicago office who were also let go. Our contact claimed that he suspected something was going on when he arrived at work this morning when upper management was in a closed-door meeting called by Pincus.
"I wasn't given two hours to get out, I was given 20 minutes. This wasn't handled very well, and a lot of people are very angry. Not only are we out of work, but our stock options they told us would be 'treasures' aren't worth the price of ink."
Brokerages and market analysts have dropped price targets on Zynga stock by up to 40 percent after the social game maker slashed its 2012 guidance further due to revenue damage from departing gamers. Zynga said it was losing paid customers from Facebook games CityVille and FarmVille, and reduced its annual guidance for the second time this year. Since the IPO in December 2011, the company has lost three quarters of its market value.
Two insider trading suits have been filed against the company, and follow investigations of Zynga staffers and CEO Mark Pincus. Pincus and other high-ranking Zynga employees are accused of selling 43 million shares of stock in April at $12 per share, when employees and other early investors were banned from selling until May. By then, the stockholders claim, the business had already begun to slump.
Zynga is also facing a lawsuit from gaming giant EA, claiming the social games developer has violated copyright law. The complaint focuses on Facebook game The Ville, where Zynga is accused of infringing on The Sims Social, EAs own casual gaming endeavor. EA believes The Ville "blatantly mimic[s] the entire framework and style of gameplay," making the two games "nearly indistinguishable."