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Zynga’s (NASDAQ:ZNGA) Third Quarter Better than Expected

Zynga’s (NASDAQ:ZNGA) Third Quarter Better than Expected


Zynga’s (NASDAQ:ZNGA) Third Quarter Better than Expected

Zynga’s ZNGA Third Quarter Better than ExpectedNEW YORK – Investors largely reacted positively to Zynga’s (NASDAQ:ZNGA) third quarter results as the company reported better than expected results for the quarter even as revenue plunged and fewer people played its digital games.  The improvements raised investor’s hopes that the company might be able to move forward under CEO Don Mattrick as shares jumped almost 13 percent in after-hours trading.

The results, announced on Thursday, were seen as the first test of Mattick’s plans to reorganize the troubled game company.  A former Microsoft (NASDAQ:MSFT), Mattrick was hired in July to replace Zynga founder Mark Pincus as CEO of the San Francisco company.

As part of Mattrick’s strategy, he has turned to an old friend, Clive Downie, to assist with the reorganization.  Downie, defected from a mobile game maker called DeNA, to become Zynga’s COO, but he and Mattrick previously worked together at video game maker Electronic Arts (NASDAQ:EA).

The decline in personal computers has been especially hard on Zynga, and it is believed that Zynga will tap into Downie’s expertise in mobile games as the company attempts to reconnect with users.  The company’s biggest hits, such as FarmVille and Mafia Wars, have primarily been played on personal computers.

In recent years, Zynga has been plagued with massive losses and share prices have plunged more than 60 percent from their IPO price of $ 10 – shares were trading at $ 3.99 in after-hours activity.  According to the company’s reports, they lost $ 68,000 in the third quarter, but this was a tremendous improvement when compared to the loss of $ 52.7 million at the same time last year.  If not counting one-time gains, Zynga said it would have lost 2 cents per share. That figure was better than the average loss of 4 cents per share projected by analysts, according to FactSet.  However, revenue tumbled 36 percent to $202.6 million — about $13 million more than analysts had predicted.

On average, 30 million people played Zynga’s games on a daily basis during the third quarter, down from 60 million at the same time last year.

To offset the impact of declining revenue and few users, the company has shed its workforce, and the cost cutting is expected to help trim Zynga’s losses again in the current quarter ending in December. Zynga has informed investors that they expect a loss ranging from $21 million to $31 million in the final quarter of the year; down from nearly $49 million at the same time last year.  According to Mattrick, ‘our teams are working hard to compete more aggressively on the Web, move to mobile and develop new hits, and I am happy with the early progress we have made.’

About Eric Kelso

Eric Kelso covers market updates and stock related news.

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