Zynga beats estimates, boosted by OMGPOP purchase

Thu Apr 26, 2012 8:14pm EDT
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By Gerry Shih

SAN FRANCISCO (Reuters) - Zynga Inc beat Wall Street's quarterly revenue forecasts on the back of its purchase of social gaming startup OMGPOP and strong performances from new titles such as "Hidden Chronicles" and "Slingo."

But shares of the social gaming company fell as it failed to show stronger growth in player numbers for its Facebook games, its core business, analysts said.

The results came as Zynga shares have tumbled 38 percent since its high on March 2 on doubts that the company could sustain its revenue growth.

Revenue grew to $321 million from $243 million in the first quarter last year.

Zynga made its biggest acquisition in late March, paying $183 million in cash for OMGPOP, soon after the obscure New York-based company's "Draw Something" game became a sensation in the mobile market.

While OMGPOP's mobile expertise fit into the San Francisco gamemaker's strategy, investors feared Zynga would increasingly turn to large and heavily leveraged acquisitions to fend off upstart rivals and drive growth. Draw Something has lost users in the weeks since the acquisition.

Zynga Chief Executive Mark Pincus assured analysts on a conference call on Thursday that the deal was "a rare instance" that did not represent any change in strategy.

"The way we build this business has been organic development," he said. "That's what you should expect to continue to drive the bulk of our growth."   Continued...

The corporate logo of Zynga Inc, the social network game development company, is shown at its headquarters in San Francisco, California April 26, 2012. REUTERS/Robert Galbraith