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May 26, 2017

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Zynga posts Q3 loss, shares jump after-hours

NEW YORK -- Battered shares of Zynga Inc. soared in after-hours trading Wednesday after the social gaming company posted stronger-than-expected revenue for the third quarter and said it will enter the gambling business.

The past few months have been tough for the company known for games such as "FarmVille" and "Words With Friends." Interest in many of its Facebook games has waned, and Zynga has had trouble making money from mobile games. It laid off workers for the first time on Tuesday to cut costs, and on Wednesday posted an outlook for the year that fell short of analysts' forecast.

As it had earlier warned, Zynga booked a loss in the July-September quarter due largely to a charge marking down the value of mobile game company OMGPop, which it acquired in March for US$183 million.

The company lost US$52.7 million, or 7 cents per share. That's down from earnings of US$12.5 million — break-even on a per-share basis — from a year earlier, when it was still privately held.

On an adjusted per-share basis Zynga broke even in the most recent quarter, matching analysts' expectations.

Revenue grew 3 percent to US$316.6 million. According to FactSet, analysts expected lower revenue of US$291 million.

Despite its troubles, Zynga is still by far the No. 1 maker of games for Facebook. As such, it relies on its Facebook games for nearly all of its revenue, though it has been working on expanding to other areas, notably mobile devices. This has been a challenge. Though "Words With Friends" is popular, it doesn't bring in as much money as games on Facebook. And Zynga lost its gamble on OMGPop, whose Pictionary-like "Draw Something" game was explosively popular, but then quickly faded away.

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