Today Zynga announced plans to lay off 15 percent of its staff, which amounts to about 314 employees. This follows massive layoffs last June, during which more than 500 employees lost their jobs. But Zynga can't stop trying to buy its way out of trouble.
In the same breath, CEO Don Mattrick, who replaced founder Mark Pincus last July, also announced that Zynga had paid $527 million to buy NaturalMotion, the gaming startup behind Clumsy Ninja, which is among the top grossing gaming apps.
As Re/Code notes:
It is Zynga's largest acquisition to date, besting the OMGPOP buy of 2012 by hundreds of millions of dollars.
Zynga is paying $391 million in cash for the company, plus 39.8 million shares of Zynga stock. That nets NaturalMotion a grand total of about $527 million as of Wednesday's closing stock price. (After the deal, Zynga will still have about $1.2 billion in cash and marketable securities, along with no debt.)
I guess they already laid off the only people who remember the cautionary tale of OMGPOP.
Mattrick insists it will be different this time:
Before it got into game development, NaturalMotion was a middleware company, making engines to power fluid body animation and artificial intelligence, which it licenses out for console and PC games. Among the most prominent licensees of that technology is Rockstar Games, which has used NaturalMotion's Morpheme and Euphoria gaming engines in a number of its biggest titles, including Grand Theft Auto V, Max Payne and Red Dead Redemption.
However, the company pointedly does not license out that same technology on mobile, holding on to it for its own uses, like My Horse and Clumsy Ninja. This could potentially be a big competitive advantage for Zynga in the coming years, as mobile games continue to grow more sophisticated and, as Mattrick points out, smartphones and tablets naturally come with more robust hardware.
Investing in middleware sounds like more strategic thinking than just chasing a hit. Mattrick told Re/Code that NaturalMotion has a "tech pipeline," which will only increase in value. But if you recall, Zynga execs used the same line about "great ideas in their pipeline" to defend their investment in OMGPOP.
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