Thursday, July 26, 2012

Zynga Inc misses Q2 forecast and cuts 2012 outlook, Facebook results watched - NASDAQ:ZNGA, FB

Shares of Facebook Inc(NASDAQ:FB) fell near to record lows after its main game provider Zynga Inc(NASDAQ:ZNGA) reported a loss in its second quarter results on Wednesday and cut its outlook for 2012, blaming the dwindling interest by the social network's players for its poor performance.

Zynga's stock crashed by 35 percent and touched a record low of $3 after the company pegged its earnings in 2012 between 4 and 9 cents a share, down from the 23 to 29 cents previously forecast.

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The maker of `Farmville' reported a net loss of $22.8 million, or 3 cents a share, compared with a profit of $1.4 million a year ago.

Its adjusted profit, which excluded certain items, was 1 cent a share, much below the 5 cents expected by analysts. Revenues for the quarter were $332.4 million, compared the $344.12 million polled by analysts.

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Facebook, which will announce its results on Thursday, is expected to be hit by Zynga's dismal performance, whose flagship Farmville game contributes about 15 percent to the Mark Zuckerberg-owned company. Shares in Facebook fell 7% to $27 in pre-market activity.

The top-rated social network has been struggling to regain investor confidence after a hyped-up market debut in May failed to live up to expectations and its shares have fallen nearly 30 percent from its inaugural price.

The declining popularity of Farmville, which accounted for slightly less than third of Zynga's revenues in the quarter, is being seen as the villain of the piece with the number of players on Facebook falling to 20 million users from 80 million in March, the social network's data showed.

Despite a rise in the game maker's daily active users by 23 percent to 72 million in the June quarter, its average daily bookings per user fell 10 percent to 4.6 cents. Zynga executives admitted that a new game 'Draw Something' acquired by the company for $183 million also failed to deliver according to expectations, though it boosted its base of monthly players.

Analysts said that though the company had introduced several new games, it was not reflected in its operating earnings.

CEO Mark Pincus, who took control of the company on Wednesday, said that changes made to Facebook's site were making it difficult for players find Zynga's existing games.

Zynga went public in December 2011 on the back of a renewed boom in internet stocks in the U.S., issuing its shares at $10 each, but has seen a 70 percent erosion in prices so far. Shares of ZNGA are down 38.36% to record low of $3.13 in pre-open activity.

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