Zynga slashes outlook, denting its stock and Facebook's

Wed Jul 25, 2012 7:37pm EDT
 
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By Gerry Shih

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.   Continued...

 
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