As stated in Part 1 of this series, on May 6, 2015, video game maker Zynga (ZNGA) announced the layoff of nearly 18% of its workforce, or approximately 364 employees. This comes as major news, particularly given that the company’s founder and chief executive officer, Mark Pincus, only returned to take over the reins at the company on April 8, 2015.
The company’s management expects the layoffs will lead to $100 million in cost savings. Yet, this isn’t the first time Zynga has announced job cuts. In June 2013, it laid off approximately 20% of its workforce. Following the latest job cuts, Zynga will have to function with ~1,600 employees.
The above chart shows a historical summary of US tech sector job cuts as reported by Challenger, Gray & Christmas, an employment consulting firm. In this case, the technology sector encompasses computers, electronics, and telecom. The 100,757 layoff announcements in 2014 were significant compared to 56,198 in 2013. Looking broadly at the tech space, layoffs increased by almost 80% last year.
In 2014, the technology sector accounted for one out of every five layoff announcements. Leading technology players Microsoft (MSFT), IBM, Symantec (SYMC), and HP (HPQ) announced layoffs as a way to keep costs in check.
Employee cost is a significant expenditure for technology companies. As a result, to keep a check on its costs, many technology companies have resorted to layoffs. In 1Q15, EMC (EMC) also announced the layoff of 1,500 employees involved with its Information Infrastructure business.
If you’re bullish about the video gaming space, you can consider investing in the Sector SPDR Trust SBI Interest (XLK). EA makes up about 0.47% of XLK.