Zynga's fourth-quarter loss narrows as game maker cuts back on costs

The results exceeded Wall Street's muted expectations, and Zynga Inc.'s battered shares increased nearly 7 percent in after-hours trading after the release of the results. After a difficult 2012 in which Zynga saw its stock price decline by 75 percent, CEO Mark Pincus called 2013 a “pivotal transition year” for the company as it seeks to cut costs further and broaden revenue sources, especially from mobile games.

Zynga went public in December 2011 with a lot of promise. Games such as “FarmVille” and “CityVille” were popular on Facebook, as the social media company was itself preparing for a highly anticipated initial public offering of stock.

But Facebook's stock stumbled, and Zynga's tumbled with it. Demand for Zynga's games weakened, and investors were worried both about Zynga's overreliance on Facebook for its revenue and signs that the two were growing apart. Zynga's stock ended 2012 at US$2.36, well below the IPO price of US$10.

Zynga responded by announcing in October that it was cutting about 5 percent of its full-time workforce of roughly 3,200 employees. The San Francisco company also killed 13 older games and closed development studios in Boston and elsewhere.

Those cuts helped.

Zynga said Tuesday that it lost US$48.6 million, or 6 cents per share, in the October-December period. That compares with a loss of US$435 million, or US$1.22 per share, in the same period a year earlier. Zynga began trading publicly on Dec. 16, 2011, and was privately held for most of the 2011 quarter.

Zynga's revenue was largely unchanged at about US$311 million. But it was well above analysts' average estimate of US$250 million, as polled by FactSet.

Zynga cut fourth-quarter expenses by two-thirds, to US$274 million from US$798 million.

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