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Zynga deactivates 500+ employees in major layoff

18 per cent of workforce begin to play 'find jobs' game

Online gaming company Zynga is getting rid of 18 per cent of its staff so its remaining employees can have enough resources to stay alive in a mobile device–led world – or so their CEO says.

The FarmVille and DrawSomething gambling gaming company announced plans to get rid of over 500 people on Monday in a memo from its Harvard Business School MBA–equipped chief Mark Pincus.

In an impressive instance of corporate "what goes up, can't go down" thinking, Pincus wrote: "None of us ever expected to face a day like today, especially when so much of our culture has been about growth."

Speaking as one employee who is keeping his job, Pincus continued, "The impact of these layoffs will be felt across every group in the company. But I think we all know this is necessary to move forward."

Zynga is sacking its staff – "reducing our cost structure" – to give the remaining employees "the runway they need to take risks and develop these breakthrough new social experiences," Pincus wrote.

No, we don't understand what that means either.

"Although these are hard decisions, I'm confident that our strategy of building leading franchises and supporting them with the largest network is the right one for the long term," Pincus wrote.

The sackings may not come as a surprise to longtime Zynga watchers, as the company had reported poor results in Q2 of this year, and Pincus had described 2013 as a "transitional year" for the company.

Zynga, like every other consumer-oriented company, has been adversely affected by the rapid shift to mobile, as business models built for the desktop era have a hard time dealing with the lower ad fees generated from mobile devices.

What could be worsening Zynga's plight is its much talked about shift last year away from hosting its games on the AWS cloud into a pricey custom infrastructure it called "the Z-cloud", which saddled the company with a pile of IT gear that, in these times of falling users, could represent massive underutilization of capital assets.

One way the giant has been trying to stanch the loss of money is to branch out into what it terms "real-money gaming," and what everyone else just calls gambling. Given the historical success of lotteries during recessions and periods of economic stagnation, that at least looks like a sure bet, given the current climate. ®

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