* Zynga cuts 2012 outlook for second time in months
* Shares fall after news
By Gerry Shih
SAN FRANCISCO, Oct 4 Zynga Inc on
Thursday slashed its 2012 outlook for the second time in two
months, warning that lagging performance from its live Internet
games and a writedown from an acquisition would drag down its
third-quarter results, and its shares fell 18 per c ent.
The company estimated a third-quarter loss of 12 cents to 14
cents and projected 2012 adjusted earnings before interest, tax,
depreciation and amortization (EBITDA) of $147 million to $162
million versus its previous outlook for $180 million to $250
Shares of Zynga fell 18 percent to $2.30, a record low,
after trade was briefly halted. The company is due to report
third-quarter financial results in three weeks.
Zynga, which is based in San Francisco, said it would take
an $85 million to $95 million charge related to its $182 million
deal in March for OMGPOP, a New York game studio that failed to
replicate the success of Draw Something, its one hit game.
In late July, Zynga cut its 2012 per share earnings
forecast, and its shares plummeted 40 percent. Shares had hit a
high of $14.69 in March.
For most of this year, the social games maker has struggled
to stem user flight from once-popular Facebook titles like
"CityVille," while its game development pipeline has been
plagued by delays.
Morale at Zynga, hailed a year ago as part of a new
generation of hot consumer Internet companies, has been
declining. The company has also been shaken by a number of
executive departures, including Chief Operating Officer John
In a memo to employees on Thursday, Zynga Chief Executive
Officer Mark Pincus said the company would address its decline
through "cost reductions and focusing our new game pipeline."
Sterne Agee analyst Arvind Bhatia said Zynga's lowered
outlook was "not a surprise, but the magnitude is a big
surprise", and he warned of the likelihood of steep cuts due to
Zynga's shrinking top line.
"I don't think this bodes well for next year because they're
going to exit the year with declining revenue and declining
EBITDA," Bhatia said. "They've got 3,000 plus people and for the
level of revenue they're generating, we should expect massive
layoffs at Zynga."