Zynga delays games, adds deals
Zynga Inc. plunged to the lowest price in more than a year after the online game company posted quarterly results at the low end of its forecast and cut its full-year outlook following the decision to delay new games.
The stock fell slightly Friday at $2.88 after dropping as low as $2.70, the lowest intraday price since June 28, 2013. The San Francisco company reported a break-even second quarter and revised its forecast for 2014. The shares had dropped 23 percent this year.
Zynga, once the leader in casual play with titles such as “FarmVille,” is postponing some new games, including updated versions of its popular poker and “Words With Friends,” to the second half of this year and 2015 for additional work as the company transitions to more mobile play. It also announced deals for games with the NFL, Tiger Woods and Warner Bros.
“I feel like we’re making progress,” CEO Don Mattrick, who’s led the company for a year, said. “We’re doing the heavy lifting right now, and the heavy lifting is investment and being disciplined and finding the right balance of shift dates.”
Zynga broke even in the last quarter, excluding items, according to a statement last week. That compared with an April forecast of break even to profit of 1 cent a share. Bookings, the value of virtual goods sold during the quarter, fell 6.7 percent to $175.1 million, hitting the low end of a forecast that ranged up to $195 million.
“The bookings were certainly lighter than expected, as well as the outlook,” said James Cakmak, an analyst with Telsey Advisory Group in New York, which doesn’t rate stocks.
With the game delays and new investments, Zynga said it expects 2014 bookings of $695 million to $725 million, down from as much as $810 million its projected in April. The company anticipates profit, or adjusted earnings before interest, taxes, depreciation and amortization, of $40 million to $60 million, less than the high of $100 million estimated previously.
Full-year earnings per share will range from a loss of 1 cent to breaking even, the company said, compared with an earlier forecast for profit of up to 3 cents.
For the current quarter, Zynga sees sales of $160 million to $170 million, and expects to break even, excluding items.
Zynga also said it is entering the sports category after obtaining licenses from the National Football League and Tiger Woods. It introduced “NFL Showdown” on a limited basis last week, and said a Tiger Woods game may be available in 2015. The company also signed a deal with Warner Bros. to create a “Looney Tunes” game that will be introduced before the holiday season.
In the last quarter, revenue totaled $153.2
“The bookings were certainly
lighter than
expected, as well
as the outlook.” James Cakmak, Telsey Advisory Group
million, down from $230.7 million a year earlier and shy of the $157.1 million average of 16 analysts’ estimates. The company’s mobile bookings surpassed Web bookings for the first time.
The net loss grew to $62.5 million from $15.8 million a year earlier, Zynga said, while daily active users fell to 29 million in the second quarter from 39 million a year earlier.
Mattrick has been hiring people to revitalize Zynga’s products and marketing. The team is restructuring the company’s offerings, with its well-known “FarmVille,” “Zynga Poker” and “Words With Friends” games facing more competition from new products such as Glu Mobile’s “Kim Kardashian: Hollywood” mobile game and King Digital Entertainment’s “Candy Crush” titles.
“We’re at a time of transition and we’re being purposeful about making good choices,” Mattrick said.