Zynga buys UK game-maker NaturalMotion for $527m

Zynga headquarters Zynga announced it will lay off 15% of its staff, or around 314 people

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Social gaming firm Zynga has announced the purchase of UK game-maker NaturalMotion for $527m (£320m).

Oxford-based NaturalMotion has had a string of mobile game hits, such as CSR Racing and Clumsy Ninja. Its purchase gives Zynga an entry into the lucrative mobile games market.

As news of the deal emerged, Zynga also reported a loss of $25m for the fourth quarter.

It said it would trim its workforce by 15% - equivalent to about 314 jobs.

Mobile help

Analysis

The acquisition calls into question the state of the UK tech sector, coming days after Google bought artificial intelligence firm DeepMind.

Some will wonder why such promising UK start-ups are unable to grow organically and instead sell out to larger, foreign firms.

Of course there are UK tech firms making a success of going it alone: ARM, CSR and Imagination Technologies for example.

But it does pose the question: does Britain have the capability for fostering the next Google or Electronic Arts, or is it inevitable that the UK version would sell out abroad?

"We believe that bringing Zynga and NaturalMotion together is the right step at the right time," said Zynga chief executive Don Mattrick in a statement.

"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."

In a note to employees, Mr Mattrick highlighted that with the acquisition, Zynga will now have five top gaming brands: Farmville, Casino, Words with friends, CSR Racing and Clumsy Ninja in the "people" category.

NaturalMotion's Clumsy Ninja has been rated more than 78,000 times in the US and UK version of Apple's App Store - the vast majority of them positive.

New leadership

Mr Mattrick also told employees the acquisition gives Zynga access to NaturalMotion's Euphoria technology, which helps create realistic motion for characters in movies and games.

The takeover of the 13-year-old firm is being interpreted by some as Mr Mattrick's bet on character-driven intellectual property.

As part of the terms co-founder of NaturalMotion, Torsten Reil, will stay on and report to Mr Mattick, and new games will continue to be released under the NaturalMotion brand.

Zynga has struggled to replicate the success it has had with desktop games Farmville and Mafia Wars and has been unable to generate new hits on smartphones.

This is seen as a crucial weakness, as more and more consumers play games on their phones.

NaturalMotion is the biggest acquisition for the firm, and it comes after Zynga bought OMGPOP for $180m in 2012, only to see that firm's flagship game, Draw Something, shed users.

In June, the company announced it would cut 18% of its workforce and then a month later, it was announced that Mr Mattrick would take over from Zynga founder Mark Pincus.

The $25m loss actually represents good news for Zynga: it is 43% lower than the same period last year.

Investors cheered the news of the acquisition and the cuts, sending Zynga's stock up in after hours trading.

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