Zynga Reports Wider Loss, Weak Outlook -- Update

By Sarah E. Needleman 

Zynga Inc. reported a significantly wider loss for the holiday quarter and projected lower-than-expected revenue for the current period amid additional investments by the game maker in search of its next big hit.

Shares of Zynga, which have fallen 45% over the past year, fell another 10% in after-hours trading.

Zynga's shares peaked in early 2012 following the release of popular Web-based games tied to Facebook like "Farmville," but they've plummeted since then as the company has failed to produce more blockbusters despite shifting focus in recent years to mobile games that consumers now prefer.

"In casual mobile gaming, you have to be a hits factory," said Daniel Ernst, an analyst with Hudson Square. "Outside of the really big hit 'Farmville,' they've struggled to repeat that."

Zynga said it plans to release between six and 10 new titles this year as well as branch out into two new categories--match-three puzzle and action-strategy games. "The profit pools are very deep in those places, and we haven't had participation in them," said Clive Downie, chief operating officer.

One of the new action-strategy titles, "Dawn of Titans," was made by NaturalMotion, a studio based in the United Kingdom that Zynga acquired last year for $527 million in cash and equity.

Mr. Downie said Zynga will continue to invest in beefing up its mobile presence in 2015. "We still have lots to do," he said. "We're not saying the transition is over." Chief Executive Don Mattrick in November called 2014 a transition year for Zynga in which the company was investing for growth.

For the three months ended Dec. 31, Zynga said it lost $45.1 million, or 5 cents a share, compared with a loss of $25.2 million, or 3 cents a share, in the year-earlier period. Excluding stock-based compensation and other costs, Zynga said it had a loss of less than a penny, narrower than the loss of 3 cents a share in the year-ago period and in-line with Wall Street estimates.

Revenue rose to $192.5 million from $176.4 million. Analysts, on average, were expecting revenue of $201.1 million, according to Thomson Reuters.

Zynga said that for the current first quarter, it expects revenue between $155 million and $165 million, below the average analyst estimate of $201 million. The company expects bookings, or sales of in-game goods and ads, between $140 million and $150 million.

Zynga said Thursday it would shutter its Beijing office and cut 71 jobs after launches of the mobile game FarmVillage failed to meet expectations. Previously, the company said a new version of "Poker" that came in the third quarter also underperformed. Other recently released titles include a new version of "Words With Friends," "Looney Tunes Dash!" and "NFL Showdown."

The game maker said it expects to complete the Beijing closure by July and record pretax charges of $3.1 million, including $2.5 million in severance and employee costs, in its quarter ending in March.

Write to Sarah E. Needleman at [e-mail]

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