Zynga closes UK office, closes games and axes 150 staff

farmville maker Zynga cuts 5% of staff and closes UK office

We have already seen stocks in social networking firms quickly decline this year and last night more of the bubble burst as social gaming firm Zynga announced, timed to coincide with the launch of the iPad Mini, that it was cutting 5% of its 3,200 workforce.

The cuts will include the closures of its operations in the UK and Japan although no word on how many are affected by these cuts.

Along with the job cuts Zynga plans to dispose of 13 older games and reduce its investment in the game The Ville. 

Chief Executive Mark Pincus revealed the cuts in a memo sent to all staff that was also published on the company blog.

Pincus said the move was designed to streamline Zynga’s operations and focus its resources on its most strategic opportunities.

Zynga has been struggling since its IPO and in August it parted company with its chief operating officer John Schappert.

The share price of the FarmVille and PetVille game maker have fallen steadily since the spring when its shares were trading at a high of $14.48 having floated on the Nasdaq at $10 in December.

Last night its stock fell 5.17% to $2.20 representing a new low for the company, which is heavily connected to Facebook where many of its games are played.

Shares in Facebook itself continue to struggle. They are currently trading at $19.50 almost half of what they floated on the Nasdaq at in May.

INTERNAL NOTE FROM ZYNGA CEO AND FOUNDER, MARK PINCUS

Team,

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 trrific 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.

Mark