Zynga loses $52.7 million in Q3, announces stock buyback

Shares of former high-flying Internet game maker finish the day just pennies above their all-time low.

Wall Street sent Zynga's stock tumbling to a new all-time low as the Internet game developer lost $52.7 million for the third quarter ended September 30, 2012.

It was just the latest PR blow to the former social media darling, which on Tuesday, announced the layoff of 150 employees , or 5 percent of its staff, as it ended 13 games and closed one of its production studios in a move to reduce expenses.

Since raising $1 billion in a highly-anticipated initial public offering last December, Zynga has been a stock shorter's delight, with shares down more than 80 percent since March. Zynga closed at $2.12 today after making its 52-week low of $2.10. By comparison, the stock's 52-week high is $15.91.

In the quarter, Zynga lost 7 cents-per-share as revenue grew 3 percent to $316.6 million. Bookings in the quarter fell 11 percent to $256 million from a year earlier. In its 2012 outlook included with the earnings report, Zynga said that it expected between $1.09 billion to $1.1 billion in bookings. It also forecast 2 cents to 3 cents in adjusted earnings per share.

Earlier this month, Zynga lowered its forecast for the quarter, putting revenue in the range of $300 million to $305 million and bookings in the range of $250 million to $255 million. The company blamed weakness in certain games within its Ville-style category. It also reduced its bookings guidance for the full year.

Zynga remains the No. 1 gaming company on Facebook with five of the 10 most popular games on the social-networking site. But during Facebook's quarterly earnings conference call yesterday, CEO Mark Zuckerberg offered a sobering harbinger when he noted the drop in Zynga-generated revenue: "Including its ad spend, Zynga comprised 7 percent of our total revenue this quarter, down from 10 percent in Q2 and 12 percent in Q3 last year," he said.

Zynga also said today that its board had authorized the buyback of up to $200 million in company stock. Separately, Zynga announced a deal with Bwin.party digital entertainment to offer real money online poker and casino games in the United Kingdom.

Shares of Zynga rallied on the news and were up more than 12 percent in after-hours trading. The company has scheduled a conference call with analysts for this afternoon to discuss the quarterly results.

CEO Mark Pincus said in a statement that Zynga remains "well positioned to capitalize on the growth of social gaming," adding that "it's more clear than ever that along with search, shop, and share, play is a fundamental pillar of the Internet, and Zynga continues to be the leader."

Wedbush analyst Michael Pachter, who has a $4 full-year price target on the stock, said in a recent report that although Zynga's turnaround attempt will not be completed in the near-term, "a reinvented Zynga, with fewer employees and fewer games under development should see its margins rise, particularly as it grows its mobile and advertising base."

 

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