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Zynga buys NaturalMotion for $527 million, cuts workforce by 15%

Zynga announced the $527 million acquisition of UK and US-based CSR Racing developer NaturalMotion in a surprise early financials report today, along with further reductions to its workforce described as a cost saving measure.


Describing NaturalMotion as a "leading mobile game and technology developer", Zynga said NaturalMotion's buyout is aimed at "accelerating planned mobile growth, and bringing in next-generation technology and tools".

NaturalMotion, which was founded in 2011 and employs approximately 260 staff in Oxford, London, Brighton and San Francisco, is responsible for CSR racing and Clumsy Ninja. However, it's also the developer of simulation technologies used in console games and movies. These include Euphoria, which was licensed by Rockstar for use in Max Payne 3 and Grand Theft Auto 5, and Endorphin, featured in Tekken 5 and the Metal Gear Solid franchise.

"Our acquisition of NaturalMotion will allow us to significantly expand our creative pipeline, accelerate our mobile growth and bring next-generation technology and tools to Zynga that we believe will fast track our ability to deliver more hit games," former Xbox boss turned Zynga CEO Don Mattrick said.

"Their creative portfolio aligns perfectly with our content strategy as Zynga will now have five top brands and capabilities in the Farm, Casino, Words, Racing and People categories."

"Don's background in AAA games and Zynga's expertise in social game play and large-scale game operations will be invaluable to helping us grow our existing CSR and Clumsy Ninja franchises and maximize the breakout potential of our upcoming titles," NaturalMotion CEO Torsten Reil said. "We've reached our first milestones - creating #1 top-grossing and top-free titles - on our own. We can't wait to see what we can achieve together with Zynga."

This is Zynga's most expensive acquisition to date, far outweighing the notorious OMPOP buy-out; the Draw Something developer was shuttered just 15 months later. The company has spent over $300 million in acquisitions since 2010.

Cost cutting
Despite fronting the money for the acquisition and boasting of performing outlook, Zynga also announced a 15% reduction in global workforce, whereby it expects to save up to $35 million in 2014.

314 staff are expected to be affected by the cuts.

By the numbers
For the quarter ending December 31 2014, Zynga posted GAAP revenue of $176 million, significantly down year on year from $311 million, resulting in losses of $25 million.

For the year ending on the same date, it posted GAAP revenue of $873 million, again well down year on year from $1.2 billion, ending with a year loss of $36 million. That's a much better result than FY 2012, when it closed with losses of $209 million.

Zynga noted that average daily bookings per daily user increased from $0.051 in the fourth quarter of 2012 to $0.060 in the fourth quarter of 2013, up 19% year-on-year, and 10% on the previous quarter.

This increase in spending helped shore up revenues as monthly unique players fell from 2.9 million in the fourth quarter of 2012 to 1.3 million. This is also a drop from the 1.6 million of the previous quarter. Daily active users, monthly active users and monthly unique users all also fell quarter-on-quarter and year-on-year.

Zynga still holds three of the top ten games on Facebook - FarmVille 2, Words With Friends and Zynga Poker. The five year old Words with Friends in particular, is still going strong, hitting record bookings in Q4 2013.

The publisher is predicting revenue up to $165 million for Q1 2014, with a net loss of up to $56 million, including restructuring costs of up to $17 million.

Zynga had not been expected to brief investors until next week, and its surprise early reveal may be tired to the NaturalMotion acquisition. The social and casual publisher will host a conference call with investors later today; stay tuned for any interesting snippets from the call.

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