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Zynga Falters, Cuts Staff & Facilities

The company raised $890 million before going public in 2011; it has subsequently lost 70% of its value

Zynga, the high-profile cloud-based games maker, is in trouble deep enough to raise questions about its continued survival.

It can’t keep up with the defection of its user base to mobile rivals – which is impacting its bookings again this quarter – and so it’s going to cut back by firing 520 people, roughly 20% of its workforce, more than it’s done since starting to lay people off last year.

It will also be closing offices in New York, Los Angeles and Dallas. It closed a Boston office in October.

The cutbacks should bring its workforce down to about 2,300 people.

Zynga founder Mark Pincus released a statement saying, “The scale that served us so well in building and delivering the leading social gaming service on the web is now making it hard to successfully lead across mobile and multi-platform, which is where social games are going to be played.”

He remarked sadly that “None of us ever expected to face a day like today, especially when so much of our culture has been about growth.”

Zynga initially got a lot of momentum for its desktop games from Facebook which has been facing a similar threat from the mobile exodus.

The $70 million-$80 million-a-year Zynga saves by the rationalization is supposed to go into mobile game development.

Investors evidently thought Zynga’s guidance was a low enough hedge that it would have no trouble sailing over it but that ain’t gonna happen. Instead, the company said its Q2 bookings should be in the lower half of the $180 million-$190 million range it provided in April, or down about 20% sequentially, with a loss of $28.5 million-$39 million, up from the $26.5 million to $36.5 million imagined, a factor of the restructuring.

Naturally the announcement Monday took points off its stock price, which fell 12% to $2.99 a share at the close of trading.

The company raised $890 million before going public in 2011 for ten bucks a share on the back of the Farmville craze. It has subsequently lost 70% of its value.

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Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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