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San Francisco’s Zynga Narrows Losses as Game Maker Cuts Costs

| February 5, 2013
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by Barbara Ortutay, AP Technology Writer

NEW YORK (AP) — Online games company Zynga said its loss narrowed in the latest quarter even though revenue was largely unchanged as the company cut expenses by laying off workers, closing offices and shutting down older games.

Zynga's headquarters (Dan Brekke/KQED)

Zynga’s headquarters (Dan Brekke/KQED)

The results exceeded Wall Street’s muted expectations and Zynga Inc.’s battered shares increased nearly 5 percent in after-hours trading after the release of the results. After a difficult 2012 in which Zynga saw its stock price decline by 75 percent, CEO Mark Pincus called 2013 a “pivotal transition year” for the company as it seeks to cut costs further and broaden revenue sources, especially from mobile games.

Zynga went public in December 2011 with a lot of promise. Games such as “FarmVille” and “CityVille” were popular on Facebook, as the social media company was itself preparing for a highly anticipated initial public offering of stock. But Facebook’s stock stumbled, and Zynga’s tumbled with it. Demand for Zynga’s games weakened, and investors were worried both about Zynga’s overreliance on Facebook for its revenue and signs that the two were growing apart. Zynga’s stock ended 2012 at $2.36, well below the IPO price of $10. Zynga responded by announcing in October that it was cutting about 5 percent of its full-time workforce of roughly 3,200 employees. The San Francisco company also killed 13 older games and closed development studios in Boston and elsewhere.

Those cuts helped.

Zynga said Tuesday that it lost $48.6 million, or 6 cents per share, in the October-December period. That compares with a loss of $435 million, or $1.22 per share, in the same period a year earlier. Zynga began trading publicly on Dec. 16, 2011, and was privately held for most of the 2011 quarter.

Zynga’s revenue was largely unchanged at about $311 million. But it was well above analysts’ average estimate of $250 million, as polled by FactSet.

Zynga cut fourth-quarter expenses by two-thirds, to $274 million from $798 million.

For the current quarter, Zynga said it expects an adjusted loss of 5 cents to 4 cents per share and revenue of $255 million to $265 million. Analysts were predicting a loss of 1 cent per share and revenue of $268 million.

Shares climbed 13 cents, or 4.7 percent, to $2.87 in after-hours trading after gaining 18 cents to close at $2.74 during the regular session. Zynga’s stock has traded from $2.09 to $15.91 in the past 52 weeks.

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