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Zynga Gets Goods News, Bad News

Zynga stockholders got some great news this week. Thanks to a better-than-expected Q1 performance, shares in the once-mighty social gaming company jumped 6 percent. Great news, right?

Unfortunately, there’s one group in the Zynga universe who won’t be celebrating that fiscal victory; the 348 staff developers who were laid off from the company this week. That’s about 18 percent of Zynga’s entire staff. Their loss will result in a savings of around $100 million for the company.

While that’s awful news for the impacted employees, it’s exactly the kind of thing that investors love to hear. Zynga stock was a hot commodity in the hours after the announcement.

Employees, however, weren’t the only thing Zynga cut loose this week.The once-mighty social gaming giant is also cutting 8 of the 10 new games it currently has in development. Most of those games are sports-related, including Tiger Woods and NFL-branded titles.

The cuts, according to company founder and current CEO, Mark Pincus, are part of an effort to focus the company’s attention on a narrower range of titles. Along with that new direction, Pincus says Zynga will be opening several new data centers to help better analyze player behavior.

Though investors saw short-term value in Zynga’s latest round of layoffs, not everyone was sold on the company’s long-range shot at building another hit like Farmville or Texas Hold ‘Em Poker.

In an interview with the New York Times, Pacific Crest Securities analyst Evan Wilson said, “Unfortunately, cutting your less effective developers doesn’t make your best developers any better, so the probability of a hit is no higher. We still don’t see that hit in its pipeline.”