UPDATE 2-Zynga reports fewer players of its online games, shares drop

Wed Apr 24, 2013 5:00pm EDT

By Gerry Shih

SAN FRANCISCO, April 24 (Reuters) - Zynga Inc said on Wednesday the number of people playing its online games dropped dramatically in the first quarter, a development that overshadowed better-than-expected revenues and sent its stock tumbling in after-hours trade.

Shares fell 10 percent to $2.99 in extended trading.

The San Francisco-based publisher behind games like "FarmVille" and "Words With Friends" said its number of monthly players continued its decline to 253 million, the lowest figure since the number peaked at 331 million at the end of the third quarter of 2012.

On an adjusted basis, Zynga reported earnings of 1 cent per share, beating analyst expectations of a loss of 4 cents per share. But the company also projected that its second-quarter loss would be between 3 to 5 cents per share, exceeding the 1 cent per share loss analysts had expected.

"The second quarter guidance is light," said Sterne Agee analyst Arvind Bhatia. "We continue to think that any hope for real growth for this nebulous company really depends on what it can do in real-money gaming."

Zynga has struggled to keep users, who once flocked to its games on Facebook Inc's website. In recent months, Zynga and Facebook have revised their business partnership, as Zynga has sought to establish itself as a more independent gaming network at the risk of receiving less visitor traffic from Facebook.

Zynga has promised investors that it could tap into a potentially lucrative new revenue stream by launching real-money casino games around the world.

The company reported revenues of $263.6 million, down 18 percent from the year-ago quarter but above Wall Street's depressed expectations as the online game maker wrung more sales htan expected out of its shrinking user base.

Zynga's quarterly bookings of $229.8 million also topped estimates but represented a 30 percent decline from a year ago.