Amid Layoffs, Zynga Acquires NaturalMotion for Half a Billion Dollars
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Zynga plans to lay off 15 percent of its workforce, the company announced on Thursday, a reduction of about 314 employees. This comes less than a year after Zynga’s last large round of staff cuts, in which the company laid off more than 500 employees last summer.
The move comes amid a year-long corporate restructuring under CEO Don Mattrick, who took the helm from co-founder Mark Pincus last July.
The cuts, as Zynga positions them, are an effort to both trim its workforce and focus on the particular types of games that Mattrick and the executive team believe will be the strongest revenue drivers in the future.
It also makes room for the newest addition to the company’s roster: The whopping acquisition of NaturalMotion, the Oxford, England-based gaming startup behind the heavily hyped and well-polished mobile game Clumsy Ninja. 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.)
Why pay so much for the startup?
“At their core, they have a breakthrough tools and tech pipeline which I believe will become more and more valuable as tablets and phones increase in their performance capability,” Zynga CEO Don Mattrick said in an interview.
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.
With the buy, NaturalMotion will add an additional 260 employees across San Francisco, London, Brighton and Oxford to Zynga’s ranks.
Eric Johnson contributed to this report.