Earnings with Friends: Zynga posts surprise profit

Earnings with Friends: Zynga posts surprise profit
Tech Corner

POSTED: Sunday, February 10, 2013 - 2:00am

UPDATED: Sunday, February 10, 2013 - 2:04am

Zynga's fourth-quarter earnings and sales topped Wall Street estimates, but the FarmVille maker still faces many challenges.

Zynga earned 1 cent per share, or $6.9 million, on sales of $311 million last quarter. Analysts polled by Thomson Reuters expected a loss of 3 cents per share and $212 million in revenue.

Shares jumped 5 percent in after-hours trading, as the numbers weren't as bad as analysts feared. But that doesn't mean its all good news for Zynga.

The tally of daily active users rose just 3 percent over the year, to 56 million in the fourth quarter of 2012. That means Zynga added only 2 million new daily active users over the past 12 months.

Perhaps more worrisome: The number of daily active users fell 6 percent from the third quarter to the fourth.

On the positive side, five of the top 10 Facebook games at the end of last year were Zynga titles: existing games Words With Friends and Zynga Poker, as well as three new games: Bubble Safari, ChefVille and FarmVille 2. Zynga cited tracking firm AppData for the Facebook stats.

For the first quarter of 2013, Zynga expects a net loss of about 3 cents per share, on sales of about $260 million.

New Zynga COO David Ko said in the release that "2013 will be a pivotal transition year," alluding to the fact that 2012 was extremely tough for the company.

The last few months for Zynga were particularly troublesome. In early October, Zynga shares plunged after the company scaled back its 2012 outlook and warned it would take a massive writedown on its purchase of "Draw Something" maker OMGPOP.

Later that month, layoffs hit: Zynga cut 5 percent of its employees, closed its Boston outpost and proposed closures of its Japan and U.K. offices. Zynga also announced at that time it would shut down about one dozen games, a list later revealed to include FishVille, Mafia Wars Shakedown, Treasure Isle and Word Scramble Challenge. PetVille and Mafia Wars 2 got the axe several weeks later.

Then came the executive shakeup. In November Zynga CFO Dave Wehner quit and joined Facebook. Later that month, Facebook and Zynga significantly revised the terms of a five-year deal they signed in late 2010. The new arrangement relaxes restrictions on both companies.

This year kicked off with another spot of bad news: Zynga's chief game designer, Brian Reynolds, resigned in January.

Still, some investors have expressed hopes that Zynga's bet (pardon the pun) on legal gambling could pay off. in December, Zynga filed an application for a gaming license in Nevada. That followed news that Zynga was partnering with bwin.party, a British gaming company that specializes in online sports betting, poker and bingo. 

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