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Zynga shores up '12 view after revenue beat, shares surge
October 24, 2012 / 8:23 PM / 5 years ago

Zynga shores up '12 view after revenue beat, shares surge

SAN FRANCISCO (Reuters) - Zynga Inc (ZNGA.O) raised the lower end of its 2012 earnings outlook after quarterly revenue beat Wall Street’s rock-bottom expectations, driving its shares 12 percent higher.

The corporate logo for Zynga is seen on a screen outside the Nasdaq Market Site in New York, December 16, 2011. REUTERS/Brendan McDermid/Files

The game publisher also announced a $200 million share buyback program and said it has begun a cost reduction plan expected to yield $15 million to $20 million in pretax savings.

The news proved a rare bright spot for Zynga, which is trying to stave off user losses that prompted it to slash its 2012 outlook twice in recent months.

The creator of “FarmVille” also announced Wednesday a deal with British firm bwin.party BPTY.L to offer online real-money gambling in the United Kingdom.

“On the margin these are positive things,” said Arvind Bhatia, an analyst with Sterne Agee. “But fundamentally they’ll still have to turn around the business. I‘m not so sure these are necessarily enough to get this stock going much higher.”

Even taking into account the after-hours share rally, Zynga would still have lost three-quarters of its market value since debuting in 2011 at $10.

CEO Mark Pincus has not assuaged most investors concerns that, while a dominant platform on Facebook and the Internet, Zynga lacks games that appeal to a growing mobile device user base.

Zynga recorded bookings of $256 million from July through September, the worst quarterly performance since late 2010 when the company was still enjoying a meteoric ascent toward its December, 2011 initial public offering.

    Average daily bookings per average daily active user, a metric that roughly measures how much revenue the company squeezes out of each gamer, dropped sharply to $0.047, a decrease of 11 percent from a year prior.

    Quarterly revenue rose to $317 million, an increase of 3 percent from a year ago. The company revised its full-year adjusted earnings to between $152 million and $162 million, up from $147 million and $162 million.

    The game maker, which has been fighting to reverse a dramatic exodus of players, had cut its 2012 earnings forecast most recently on October 4 when it warned investors its top line would be affected by poor performance in core money-making Internet games like “CityVille”.

    Zynga’s stock was up at $2.39 in extended trade after closing at $2.129 on the Nasdaq. (Reporting By Gerry Shih; Editing by Bernard Orr)

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