Zynga's Stock Value Falls 40 Percent After Poor Q2 Performance - The UpStream

Zynga's Stock Value Falls 40 Percent After Poor Q2 Performance

posted Wednesday Jul 25, 2012 by Nicholas DiMeo

Zynga's Stock Value Falls 40 Percent After Poor Q2 Performance

When Zynga purchased developer studio OMGPOP for $200 million, we thought they were either crazy or were going to make something happen and we just weren't aware. Shortly after the big expense, however, the social game company put on an "Unleashed Event" to show the media the new games they were coming out with in order to save the company. Unfortunately, the thought of new games like Elite Slots and Matching with Friends has not been enough for the company, who has seen a sharp downturn in the amount of people actually playing Zynga games in the past two months.

This week, things are worse for Zynga and during the after-hours trading on the 25th, Zynga's stock value went down by 35 percent. Investors and stockholders alike were obviously not pleased with the company's monumentally awful earnings call and spoke with their dollars about losing a lot of faith in the social game giant.

How much money was lost and what happens now? We have the details after the break.

On the call, Zynga stated they posted a revenue of $332 million but a net loss of over $22 million, which comes out to 3 cents per share. To put this in perspective, last year at this time they reported revenue of $279 million and an actual gain of $1.4 million. Because of that, even though the stock closed at $5.19, trading continued to happen and the price dropped another 40 percent before leveling out 5 percent up from there.

CEO Mark Pincus tried to explain the matter,

{We} faced new short-term challenges which led to a sequential decline in bookings. Despite this, we're optimistic about the long-term growth prospects on mobile where we have a window of opportunity to drive the same kind of social gaming revolution that we enabled on the web.

Pincus also said on the call that they are looking to launch an online poker game where players can actually bet with real-money and that will happen sometime in the first half of next year. Can that notion of a future, combined with recently-launched games like Bubble Safari and The Ville save the company from losing even more money by this time next year? Will Zynga even be around by next summer? At the beginning of the year when the stock went public, shares were trading at $10 a piece, with Zynga's highest stock value being almost $15 in March. Are users finally sick of the same social games, of Facebook or even of both platforms? It's quite possible. For success, the company will have to focus on two important things outside of making good, new games that people want to play. First, they better hope the Draw Something TV show gets them some fast cash and makes it on-air past the pilot episode. Then, Zynga needs to ensure games like SimCity Social don't put them out of business by the holiday season. Are you still playing Zynga games or have you moved on to other things to kill some time? Let us know in the comments section.


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