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Zynga woes deepen as it loses money and players

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(Globalpost/GlobalPost)

Social games pioneer Zynga reported Thursday that it lost money and players in the last quarter, sending its already struggling shares tumbling.

Investors also seemed disappointed that Zynga has sidelined efforts to get into real-money gambling in the United States, opting instead to pour its energy into the booming market for play on smartphones or tablets.

"Zynga believes its biggest opportunity is to focus on free to play social games," the company said in the earnings release.

"While the company continues to evaluate its real-money gaming products in the United Kingdom test, Zynga is making the focused choice not to pursue a license for real money gaming in the United States."

Zynga said that it lost $15.8 million on revenue that shrank 38 percent from a year earlier to $230.7 million.

Meanwhile, the number of people playing Zynga games daily plunged 45 percent from last year to 39 million, according to the company.

The number of monthly active users was down 39 percent to 187 million in a year-over-year comparison.

Zynga shares plunged about 14 percent to $3 in after-hours trading that followed release of the quarterly earnings figures.

San Francisco-based Zynga last month announced that it is cutting nearly a fifth of its staff, or 520 jobs, as it refocuses on games for mobile devices.

Zynga founder Mark Pincus said the cuts were need for the company to "move forward."

Zynga has been pulling the plug on unpopular games and investing in titles for play on smartphones or tablets, as well as its own online arena at zynga.com.

Zynga rose to stardom by tailoring games for Facebook, but the two firms have grown apart in the past year as Facebook develops new revenue streams and Zynga seeks new consumers.

The San Francisco-based company had made moves into real-money gaming with the potential to generate windfalls from popular titles such as Zynga Poker, which saw the number of players shrink in the recent quarter.

Earlier this month, Pincus recruited Microsoft entertainment division chief Don Mattrick to take over as top dog at Zynga. Pincus is remaining on as chief product officer.

"The next few years will be a time of phenomenal growth in our space and Zynga has incredible assets to take advantage of the market opportunity," Mattrick said.

"We have a lot of hard work in front of us and as we reset, we expect to see more volatility in our business than we would like over the next two to four quarters."

Zynga hit the stock market with a billion-dollar listing in December of 2011 by offering 100 million shares -- one seventh of the company's total -- at $10 a pop.

Mattrick said he expected Zynga to weather six months to a year of "volatility" before it gets on track.

"It is clear that the market opportunity around us is growing at an incredible clip and that we are missing out on the platform growth that Apple, Facebook and Google are seeing," Mattrick said.

"There is no denying we are not where we want to be, but there is no denying we have what it takes to get back to winning."

Mattrick said he will spend the next 90 days targeting opportunities and spending time "heads down" with the Zynga team analyzing how people and assets are deployed and resetting the product pipeline with an eye toward fielding hit mobile games.

During the more than six years that Mattrick was part of Microsoft's interactive entertainment team, Xbox 360 became the top selling console in North America and membership in the Xbox Live service grew eight-fold to 48 million. gc/dc

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http://www.globalpost.com/dispatch/news/afp/130725/zynga-woes-deepen-it-loses-money-and-players-0