Zynga slashes outlook, denting its stock and Facebook's

SAN FRANCISCO Wed Jul 25, 2012 7:37pm EDT

Zynga General Manager Manuel Bronstein speaks during the Zynga Unleashed event at the company's headquarters in San Francisco, California in this June 26, 2012, file photo. The social gaming company slashed its 2012 earnings outlook after its second-quarter results badly missed Wall Street's targets, sending its stock plunging more than 40 percent to a record low. REUTERS/Stephen Lam/Files

Zynga General Manager Manuel Bronstein speaks during the Zynga Unleashed event at the company's headquarters in San Francisco, California in this June 26, 2012, file photo. The social gaming company slashed its 2012 earnings outlook after its second-quarter results badly missed Wall Street's targets, sending its stock plunging more than 40 percent to a record low.

Credit: Reuters/Stephen Lam/Files

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SAN FRANCISCO (Reuters) - Zynga Inc, the social gaming company, slashed its 2012 earnings outlook after its second-quarter results badly missed Wall Street's targets, sending its stock plunging more than 40 percent to a record low.

The miss by the creator of the "Farmville and "Hidden Chronicles" games also dragged down shares of Facebook Inc. Facebook, which relies on the game publisher for some 15 percent of its revenue, is to release its inaugural results as a public company on Thursday.

Zynga slashed its 2012 earnings outlook to 4 to 9 cents a share, down from a previously projected 23 to 29 cents.

The company was a star of the tech world when it went public last December, but it has floundered in the face of intense competition from rival casual games makers, and users who abandoned its predominantly Web-based games for mobile titles.

"The quarter is a disaster," said Sterne Agee analyst Arvind Bhatia. "It's looking more and more like this was a fad because they've introduced so many new games, yet EBITDA continues to come down," he said, referring to earnings before interest, taxes, depreciation and amortization.

"The company has been saying for some time that declining traffic doesn't matter and clearly it does. The decline in some of their top games in terms of traffic has been huge."

Zynga, founded by CEO Mark Pincus, reported quarterly revenues of $332.4 million, below the average analyst estimate of $344.12 million, according to Thomson Reuters I/B/E/S.

It reported a net loss of $22.8 million, or 3 cents a share, compared with a profit of $1.4 million a year ago. Excluding certain items, it reported a profit of 1 cent a share, below the 5 cents that Wall Street had expected.

The company said Pincus had taken control of the company on or around Wednesday, with a rise in his voting stake to around 50.15 percent. The increase in voting power to over 50 percent was due to sales and/or transfers by other holders of Class B shares, Zynga said.

The company blamed the poor performance of its established, money-making games - Facebook-based titles like "Cityville" - on changes to Facebook's algorithm, which Zynga said spurred users to discover new games rather than repeatedly play existing Zynga offerings.

Zynga's daily active users rose by 23 percent to 72 million in the second quarter, but the company earned less revenue per subscriber. Average daily bookings per user dwindled to 4.6 cents in the quarter, down about 10 percent.

Shares in Zynga plummeted 35 percent to as low as $3.00 in after-hours trade, from a close of $5.078 on Nasdaq. Zynga went public last December at a price of $10 a share.

Stock in Facebook slid almost 7 percent to $27.33, from a close on the Nasdaq of $29.34.

(Editing by Leslie Adler)

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Comments (1)
satv wrote:
“Opppps,I have sold you something for $15 that was worth only a penny”.-ZYNGA.

How is that possible? It is possible in America because thugs are protected by law,They just require to do the paper work right then nobody can pull their shirts there after.All American law can do is to punish people like Rajaratnam who are out of soil.I just wonder how American throw dust on third world countries on the issue of corruption.It’s just a perfect paper work that keep America out of corruption despite being most corrupted country in the world.

Jul 25, 2012 8:55pm EDT  --  Report as abuse
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