Zynga Misses Estimates as Users Flee Social Games for Mobile - SFGate

Zynga Misses Estimates as Users Flee Social Games for Mobile - SFGate






Zynga Misses Estimates as Users Flee Social Games for Mobile
Douglas MacMillan, ©2012 Bloomberg News



July 25 (Bloomberg) -- Zynga Inc., the biggest developer of games played on Facebook Inc., missed analysts’ second-quarter revenue and profit estimates as the company struggled to add social game users.


Shares slumped as much as 42 percent in extended trading, dragging Facebook’s stock down as much as 9.7 percent. Sales were $332.5 million, Zynga said today in a statement. That missed the average $343.1 million analyst estimate, according to data compiled by Bloomberg. Profit excluding some items was 1 cent a share, less than the 6-cent estimate.


Zynga has faced growing fatigue among its users, many who play fewer social games than before or have shifted to mobile apps. The company’s best-known franchises, “FarmVille,” “CityVille,” and “CastleVille,” all lost at least 20 percent of users between the first and second quarters of this year, said Arvind Bhatia, analyst at Sterne Agee & Leach Inc. in Dallas, citing AppData numbers.


“It’s a disaster,” said Bhatia, who has a neutral rating on shares of Zynga. “It’s starting to look more and more like a fad, and any hope of a second-half recovery is shot with these kinds of numbers.”


Zynga, based in San Francisco, makes money by selling virtual goods within its games -- say, a gun in “Mafia Wars” or a tractor in “FarmVille.”


The shares fell as low as $2.93 after the report. They had gained 3.3 percent to $5.08 at the close in New York. The drop in late trading adds to the 49 percent decline in Zynga since its initial public offering in December.


Facebook shares tumbled as low as $26.50 following Zynga’s report, after rising 3.1 percent to $29.34 at today’s close.




Bookings Impact




Zynga cut its outlook for bookings, or the total value of virtual goods sold, for 2012, in part blaming a drop in sales expectations for Draw Something, a mobile game it paid $180 million to acquire earlier this year.


“We are lowering our outlook to reflect delays in launching new games, a faster decline in existing Web games due in part to a more challenging environment on the Facebook Web platform, and reduced expectations for Draw Something,” the company said in the statement.


Zynga said 2012 bookings will be $1.15 billion to $1.23 billion, down from an April projection of $1.43 billion to $1.5 billion. Zynga also said it expects 2012 earnings, excluding some items, of 4 cents to 9 cents a share, compared with a prior range of 23 cents to 29 cents.




Facebook Games




The company makes the five most popular games played on Facebook, according to AppData. “Texas HoldEm Poker,” with 35.2 million monthly active users, and “Bubble Safari,” with 28.2 million users, top the social gaming charts.


The company posted a second-quarter net loss of $22.8 million, or 3 cents a share, compared with net income of $1.4 million, or break-even, a year earlier.


Last week, Zynga expanded its board as it named former Yahoo! Inc. executive Ellen Siminoff its first female director.


The company expects to spend hundreds of millions of dollars acquiring game developers over the next three to five years, Pincus told Bloomberg in an interview earlier this year.








--Editors: Reed Stevenson, Jillian Ward




To contact the reporter on this story: Douglas MacMillan in San Francisco at dmacmillan3@bloomberg.net




To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net