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Monday, June 3, 2013

Zynga Takes Another Hit

Zynga has been trying to leap the yawning gap from Web-based games, where it thrived, to the entirely different and more brutal world of mobile. Monday, it fell into the abyss.

The San Francisco company, which pioneered the field of social games, said it was dismissing 520 workers, nearly a fifth of its staff.

“None of us ever expected to face a day like today, especially when so much of our culture has been about growth,” Mark Pincus, the chief executive, told Zynga employees in a blog post. “But I think we all know this is necessary to move forward.”

There was lots more bad news: outside of its FarmVille franchise, games are “underperforming.” Second-quarter bookings will be in the lower range of the company’s estimates.

Shares in Zynga, which were briefly halted before the announcement, immediately dropped 12 percent. The company now trades for about $3 a share. That is a far cry from the heady months after its December 2011 public offering, when it was as high as $15.

Since then, the San Francisco company seemed to have hardly managed a successful move. It acquired the hot game Draw Something only to see it immediately slump. Efforts to set up a gaming platform independent of Facebook have proved underwhelming. New games like Mafia Wars II never caught on.

The company spent the second half of last year trying to retrench, with much of its senior management leaving or being reassigned.

In April the company said revenue for the first quarter was down 18 percent from 2012, but analysts were encouraged that Zynga managed to earn a penny a share. They had expected a loss.

Mr. Pincus said the cuts involved a “proactive commitment.”

“By reducing our cost structure today we will offer our teams the runway they need to take risks and develop these breakthrough new social experiences,” he said.