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Zynga shares fall 41% on earnings

July 25, 2012|By Alex Pham, Los Angeles Times
  • Customers play videogames under advertisement posters of Nintendo's video game console 3DS LL at an electronics shop in Tokyo.
Customers play videogames under advertisement posters of Nintendo's… (Kazuhiro Nogi / AFP/Getty…)

It was SadVille atZynga Inc.'s headquarters after the San Francisco creator of such games as"FarmVille"and "CityVille" posted its second-quarter earnings and watched its stock price immediately drop 41%.

Zynga's stock, which had gained 16 cents to close at $5.08, plunged to as low as $3 in after-hours trading following the earnings release. The price was a significant fall from grace from Zynga's initial public offering in December, when its shares debuted at $10 and climbed to a high of $14.69 on March 2.

The gaming company's disappointing earnings were also blamed, in part, for an 8% drop in the price ofFacebook Inc.'s shares after hours. Zynga accounted for 12% of Facebook's revenue in 2011.

Many of Zynga's second-quarter numbers pointed in the right direction. Its revenue of $332.5 million was up 19% from a year earlier, when it posted $279.1 million in sales. The number of people who played Zynga's social games each month grew 34% to 306 million.

Its social games continued to dominate the charts on Facebook, capturing seven of the top 10 titles on the social network.

Investors, however, focused on less sanguine figures. Zynga swung to a loss of $22.8 million compared with a profit of $1.4 million last year. In addition, the amount of revenue Zynga generated on average from each daily player fell 10% to 4.6 cents, down from 5.1 cents in 2011. Zynga also lowered its revenue forecast, estimating sales of $1.15 billion to $1.225 billion for the year.

In a statement, the company blamed "a faster decline in existing Web games due in part to a more challenging environment on the Facebook Web platform." Zynga also said "Draw Something," developed by OMGPOP, a studio Zynga bought in March for close to $200 million, has been "underperforming."

To boost its prospects, Zynga Chief Executive Mark Pincus announced that his company plans to jump into the highly lucrative market for online gambling in international markets in the first half of 2013.

Meanwhile,Nintendo Co.posted a 9.7% drop in revenue to $1.09 billion in its fiscal first quarter ended June 30, compared with $1.2 billion a year earlier. Its loss narrowed to $220.3 million, compared with a loss of $326.5 million in the same period last year.

alex.pham@latimes.com

Times staff writer Jessica Guynn contributed to this report.

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