More Layoffs And Downsizing At Vostu, South America’s One-Time Frontrunner in Gaming
Vostu, the onetime darling of the social gaming world in South America, appears to have just had a fresh round of layoffs over the last few weeks.
Multiple sources who have worked with the company said that Vostu laid off about 100 people and is now down to somewhere between 50 and 70 employees. Vostu has not replied to multiple requests for comment.
This is a huge decline for the company, which took at least $46 million in funding from investors including Accel Partners, Tiger Technology Global, Intel Capital and General Catalyst. At the end of 2011, the company had around 580 employees spread across Sao Paulo, Buenos Aires and New York and claimed that 25 percent of Internet users in Brazil played Vostu games.
So the company’s headcount is now about one-tenth of what it was two years ago. The company had an earlier round of layoffs around the same time last year.
It looks like a perfect storm of factors created headwinds for the company. Orkut’s gradual decline to Facebook in Brazil meant that Vostu had to play on a more competitive field against established social gaming companies from the U.S. and Europe. The company apparently started spending in an ROI-negative way on marketing and user acquisition on the Facebook platform, according to one source. According to app tracking site AppData, Vostu has about 2.3 million monthly active users (or about 1/100th of what Zynga has on the platform).
The Facebook platform has also changed dramatically over the last two to three years, in curbing virality for certain kinds of games. Many developers like Kabam and Zynga have transitioned to focusing on mobile platforms to reduce their exposure to Facebook, although other companies like King.com and Wooga have thrived in this new environment.
At the same time, Zynga’s weak post-IPO performance has put a damper on valuations and large-scale acquisitions across the board for the gaming industry. That meant that any expectations for an exit had to be seriously downscaled. Two sources said that the company had been negotiating a sale for either the whole company or a fraction of it as of last month.
There were also internal management and political issues with the engineering and product teams unable to come to a consensus on specs that would work for various games. That left the company organizationally unable to add features or service games in a way that would keep players engaged.
“Essentially, Vostu was unable to take risks and that brought the company down,” says one source.
Two of Vostu’s co-founders Mario Schlosser and Daniel Kafie left their positions as chief scientist and CEO early last year, while Matias Recchia and Andres Bernasconi were left in charge. It looks like Bernasconi just left this month while Recchia departed last month, according to their LinkedIn profiles.
They may be room for hope, though. Brazilian news site Apertura, which first reported the layoffs, said that Kafie may be back in the ring as CEO. One of our sources said this was possible and if that’s the case, Vostu would be “in good hands.”
“I have lot of trust in Daniel Kafie,” they said. “They will reinvent the business of this company.”
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Japanese Hardware Layoffs Continue: Panasonic To Cut 10K More Workers In The Next 5 Months
The Japanese consumer electronics industry continues to feel the squeeze in the economy, with one of the more painful effects being mass layoffs of workers. In the latest development, Panasonic Corp. says that it will reduce its workforce by 10,000 employees by the end of this fiscal year, which completes in March 2013. The company had already warned that it will post losses of $10 billion for the full year, because of writeoffs in its mobile, solar panel and lithium batter businesses.
The mobile business in particular has been seeing some tough times, with Panasonic Mobile reportedly preparing to pull out of the European market altogether, leaving it covering only Asia going forward.
While Panasonic has yet to make an official statement about the 10,000 layoffs, CFO Hideaki Kawai made the plans public in an interview with Reuters. They are part of a wider strategy to reach operating profits of $2.52 billion (¥200 billion) in the next three years. At the moment a fifth of its 100 business units are losing money, and there are plans for some of these to also be sold off, too.
Panasonic, along with other Japanese consumer electronics giants, have been between a rock and a hard place for a while now: on the one hand, there is the global economic downturn that has seen reduced consumer spending; on the other, the rise of Chinese and Korean, and other Asian companies making similar goods for significantly cheaper prices — or simply better quality, more desirable goods — has impacted these companies’ margins. Panasonic is a grandaddy of Japanese consumer electronics — it was founded in 1918 and remains Japan’s biggest employer — but in the last five years, it has posted four annual net losses.
The 10,000 cuts come on the heels of 36,000 layoffs at Panasonic last year. Several other Japanese consumer electronics giants have also faced mass layoffs. These include 11,000 workers reportedly getting the chop at Sharp (made public in September), and Sony announcing redundancies of a further 2,800 workers in October, part of its plan to cut 10,000 in total.
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Two Years Post-Acquisition, Ngmoco Axes Bulk Of Staff At iOS Game Studio Freeverse
Mobile gaming outfit Ngmoco has swung the ax on Freeverse, the Mac and iOS game development studio it acquired back in February 2010. Today Ngmoco, which is now owned by Japanese mobile gaming giant DeNA, laid off the bulk of Freeverse’s staff, possibly as part of a move to close the studio — a move that one tipster tells us staffers at the 18-year-old Freeverse “did not see coming.” The layoffs come just one week after the departures of Freeverse’s co-founders, brothers Ian and Colin Lynch Smith.
When contacted for comment, an Ngmoco rep sent the following statement attributed to VP of Studios Clive Downey:
“Today we have organized Freeverse into a focused team, building on a foundation of talent from the studio in NY. Unfortunately this means we have had to say goodbye to some people. We thank everyone who has contributed to DeNA and Freeverse over the years and wish those moving on the very best.
Freeverse founders Ian and Colin Smith are taking a well deserved break, after building their company, helming the studio through years of success, many game launches, and the acquisition by ngmoco.
The new studio leadership will come from within, led by respected vet Nathan Camarillo.”
One source tells TechCrunch that today’s layoffs may have affected some 20 people, though the Ngmoco rep has not yet confirmed the exact number of jobs cut. Although layoffs are always a bummer, in this frothy environment there is a silver lining, as TouchArcade’s Eli Hodapp has pointed out: “The up side, if there was one to this terrible situation, is that if you’re an iOS developer in the New York area looking to scoop up some fantastic and entirely squandered talent: Now is your chance to hire some really great people.” Former Freeverse-er Bruce Morrison put it like this:
If your looking for good people to hire in NYC. The best fucking dev team of all time just became available.—
Bruce Morrison (@hippiemanx) August 30, 2012
This is not the first round of layoffs at Ngmoco since it was acquired by DeNA in October 2010. In February, TechCrunch’s Eric Eldon reported that Ngmoco had laid off some 30 people just before DeNA posted a positive quarterly earnings report.
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Goodbye Moto: Google Will Send Out 4,000 Motorola Pink Slips Starting Today, Part Of Bigger Overhaul
With Google’s $12.5 billion acquisition of Motorola Mobility closing in May, Google is now moving ahead on getting its new property in order. The New York Times is reporting that Google is preparing lay off 20 percent of the staff, or 4,000 jobs, and close one-third of its 94 worldwide offices – notifications of which will start to get sent out to employees beginning today (Monday), TechCrunch has learned.
(Update: Google has now posted an 8-K form confirming the cuts and closures, with the SEC noting a charge of up to $275 million for the cuts, initially coming in the third quarter, but also forebodingly noting that additional future charges for a bigger plan to overhaul the business “could be significant”. More details below)
TechCrunch first reported these job cuts would happen back in May, and now we have a bit more colour on this:
For starters, it looks like these cuts are getting made across the board as part of a general downsizing, rather than a strategic move targeting specific areas of the business. In other words, these cuts won’t give us any additional enlightenment about whether Google will continue to pursue Motorola’s set-top box business, or handset making business, or focus mainly on the 17k+ patents it has picked up in the deal. Nevertheless, the main aim of cuts is to return Motorola’s handset unit to profitability.
The 8-K form confirms that in addition to the job cuts, it is planning a big business overhaul. About one-third of Motorola’s 90 facilities will be closed, and the mobile product portfolio will be “simplified” and focused on smartphones, confirming other comments made in the NYT interview. This will mean the likely prospect of more restructuring charges. From the 8-K form:
Google expects to incur a severance-related charge of no greater than $275 million, which it believes will be largely recognized in the third quarter, with the remaining severance-related costs recognized by the end of 2012. Google also expects to incur other restructuring charges related to the actions described above, the majority of which will be recognized in the third quarter. Although Google cannot currently predict the amount of these other charges at this time, these additional charges could be significant.
Google would not comment on when layout notices would start to be sent out, or what areas will be affected, but it did confirm the layoffs as reported in the NYT. A spokesperson said that the main aim is to return Motorola’s longtime loss-making mobile devices unit to profitability:
“While we expect this strategy to create new opportunities and help return Motorola’s mobile devices unit to profitability, we understand how hard these changes will be for the employees concerned. Motorola is committed to helping them through this difficult transition and will be providing generous severance packages, as well as outplacement services to help people find new jobs.”
The NYT piece notes that one-third of the cuts will be in the U.S. with the remaining two-thirds in the rest of the world. TechCrunch understands that Motorola had already been negotiating with key personnel at the company for weeks already.
Dennis Woodside, the Google transplant who is now Motorola’s new chief executive, told the NYT that Motorola will be streamlining quite a lot: goodbye to unprofitable markets, feature phone devices and a wide range of handset models from 27 introduced last year to “just a few” focusing on new features like better batteries and cameras and sensors that can identify people by their voices. That means more people in R&D and probably significantly less in manufacturing centers.
It’s not surprising that the majority of the cuts will happen outside the U.S., since this is what appears to be driving a lot of the decline at Motorola, as it competes against much bigger players like Apple and fellow-Android licensee Samsung.
As Google’s Android has risen to become the world’s most popular smartphone platform, Motorola has not been one of the chief beneficiaries of that rise in the same way that Samsung has.
Moto, in fact, has been on a downward trajectory, with its Q1 global share of mobile sales, according to Gartner, down to 2% worldwide (from 2.1% in Q1 ). At least in the U.S., Motorola still has a ranking, if small, proportion smartphone business. According to figures out from comScore, for the quarter ended June 30, Motorola accounted for 11.7% of all smartphone activity in the U.S., putting it as the fourth most-used smartphone brand in the U.S. But with that number down 1.1% from a year ago, this points to how the company unit sales are actually in decline there as well.
In Google’s last quarterly earnings, the first to include Motorola, Google noted that Motorola posted a GAAP operating loss of $233 million ($192 million for the mobile segment and $41 million for the home segment), equivalent to -19% of Motorola revenues in the second quarter of 2012. Non-GAAP operating loss for Motorola in the second quarter of 2012 was $38 million, or -3% of Motorola revenues.
Google reported Motorola hardware (and other) revenues of $1.25 billion, compared to $3.3 billion a year ago. (Google didn’t post revenues for Motorola from the year ago, so this may not be a straight like-for-like comparison.)
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As Nokia Completes Scalado Purchase, An Ambitious Spinoff Emerges: Oulutalent
Today Nokia announced that its deal to buy imaging company Scalado has been finalized — a sign of another piece of the puzzle falling into place for Nokia as it continues to restructure to reverse huge declines in handset sales. But that dark, Finnish cloud has a silver lining that we’ve been noticing: the emergence of a bunch of startups being formed by many among the 40,000 people that have been laid off. The other day we wrote about how some of the smaller players have been picking up funding from Nokia courtesy of its Bridge program. And now we’ve come across what might possibly be one of the more ambitious spin-offs yet.
Oulutalent is a team of no less than 500 former-Nokia employees based in the town of Oulu. The skills on offer, and the ready-made team, is a testament to what Nokia has had to drop by the wayside, but also what is on the market for the many tech companies out there fighting the war for talent.
Averaging more than 10 years of experience, the group claims to have “created over 50 devices including major blockbusters. In addition to devices, we have done novel cloud services and UI platforms from scratch. We are on the leading edge with touch and LTE phones, Linux and WiMax tablets and we have world-class technical competence on all.”
The group is being led by Pekka Väyrynen, an engineer who developed patented wireless technology for Nokia (that is, the patents that are reported worth up to $6 billion and may well start getting sold off to help Nokia’s cash position).
Effectively, what we have in Oulutalent is a handset-making operation that could in theory be bolted on to a company with mobile ambitions (Amazon? A new Asian entrant? Nokia’s MeeGo spinoff Jolla?); or one that is growing already and needs to expand. It plays on the big area of outsourced operations — something that may have been too expensive for Nokia to maintain may well be hard for another as well; this lets that cost stay off the balance sheet.
Oulutalent notes that it can provide a range of consulting and technical services, from identifying market opportunities and planning product portfolios; to “concepting” (covering hardware and user experience, simulation and prototyping); turning those concepts into products; and then helping with the aftersales.
One twist is that the team is not in full effect yet, with some employees still working out their terms with Nokia, according to a spokesperson for the company.
And another is whether Oulutalent will be able to prove to the market that it’s worth the investment: its success is partly dependent on whether others believe Nokia’s downfall was mainly due to some bad decisions from management; or whether it was also down to those executing on decisions.
Oulutalent is offering itself as a group for “turn-key product creation,” but there may be possibilities to engage smaller teams, too. That is the approach being taken by a similar project called Kyvyt (Finnish for “talent”). Despite its Finnish name, Kyvyt is based in the German town of Ulm, where Nokia also had a large team of people who apparently were working on its low-end Linux based platform Meltemi (another project Nokia left on the cutting-room floor). Kyvyt is offering out its pool of talent as and where it is needed, and it is also running events like job fairs, as well as posting job adverts on its site.
The Oulutalent spokesperson says that it will cooperate with Kyvyt, although declined to specify what that will mean. More detailed information, she says, will be coming out in coming weeks.
Ironically, as Nokia has been cutting staff, it’s taken a few on, too, to focus on areas where it hopes to stand out against handset competitors. The Scalado purchase will see some 50 people join Nokia’s smartphone operations in Lund, Sweden, where Nokia will be incorporating Scalado’s technologies and IP into its imaging business:
“We believe that this acquisition will strengthen Nokia’s leading position in mobile imaging and provide us with a great opportunity to create even better imaging products and applications,” Jo Harlow, executive vice president, Smart Devices at Nokia, said in a statement.
In the bigger picture, Nokia has insisted that it is safe and secure as far as cash reserves are concerned, but at the same time it’s running out of goodwill with the investment community: Nokia’s debt rating yesterday was cut once again by Moody’s, as the agency noted that losses in the current quarter will be even greater than previously thought. The three major credit agencies, Standard & Poor’s; Fitch and Moody’s have all now graded Nokia’s debt down to “junk” status.
Nokia, as before, has said that the “impact on the company is limited” with the company taking action to turn things around. The company says at the end of June it had a cash balance of €9.4 billion and a net cash balance of €4.2 billion, both higher than a year ago.
It’s not clear who is providing the capital to finance Oulutalent, although the Bridge program we wrote about before is basically restricted to startups of four people or less, so it’s unlikely to play a role here. We’re asking questions and will update as we learn more.
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