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  • Zynga: Desperately Trying to Catch Attention of Mobile Gamers
Technology Articles > Software > Games & Entertainment > Zynga: Desperately Trying to Catch Attention of Mobile Gamers

After Zynga's initial public offering in December, when they were expected to be the next big thing in the social gaming world, their stock plummeted from $10 to $2.21 a share. The question remains: will the company easily recover? Zynga's CEO Mark Pincus is hard at work, and it seems the solution is to make something that will wow the mobile gaming crowd. Analysts agree, adding that he should also consider cutting back on its global workforce of roughly 3,000 people.

Last Launches: Not Doing So Well

Zynga has launched numerous games in 2012, including “ChefVille” and “The Ville,” and says there are more in the works. Pincus put out a memo for all employees on Thursday, making them aware their continued interest in the mobile gaming side of its business. At the same time, he warned of future “targeted cost reductions” which analysts are translating “layoffs” as Zynga steps back a bit from their most popular Facebook games, such as “FarmVille” and “FrontierVille.”

It will be interesting to see how the company goes about this transition, as they are a top name in Facebook gaming. “FrontierVille,” “FarmVille,” “Mafia Wars,” “CityVille,” and “Zynga Poker,” all played on the Facebook platform, accounted for a whopping 83 percent of the company's total revenue last year. The downward spiral began when users switched from this web-based game environment to the mobile gaming environment on their smartphones offered by other game publishers.

The number of pay-to-play users jumped in the second quarter from 3.5 million to 4.1 million, and the only likely reason is the highly popular game “Draw Something” which Zynga purchased from Omgpop back in March. Zynga announced it will write off almost half of the games $183 million cost. Although the financial state of the company is slipping, it still has a sizable amount of cash holdilngs (about $1.6 billion) and should be able to weather the storm nicely.

Employees Quitting: Never a Good Sign

People seem to be leaving the company more frequently these days as well. Most notably, the two creators of Zynga's most popular mobile game, “Words with Friends,” followed by a dozen others in the past six months. Investors feel this is a bad omen for the company, that maybe the company cannot survive the switch to mobile gaming.

Pincus has asked employees “to not lose sight of the bigger picture,” saying that he plans to grow the online gambling games. That would mean the “bigger picture” could take years to be seen, especially as it would take anywhere from 18 to 24 months to be legalized by US authorities. Can investors wait that long? If they see the potential through “Zynga Poker”, maybe they can. Despite users playing for virtual winnings rather than real cash prizes, it is the world's largest online poker game. This game alone brought 18 percent of Zynga's total revenue of $332.4 million last quarter alone, just behind “FarmVille” which brought roughly 29 percent. The company hopes to test its success overseas, where online gambling is somewhat legal, in the first half of 2013.

Takeover In Their Future?

There are those on Wall Street that speculate the company will fall victim to a takeover due to the 80 percent drop in its stock. Zynga was trading below the book value of $2.30 per share on Friday. Some names being tossed around that could possibly have an interest in acquiring the company: Amazon, Activision, and Yahoo. However, analysts aren't quite sure if acquiring such a company is in the best interest of any of these companies as there isn't anything good coming out of any social gaming deals these days. Most recently, both Disney and EA have lost money after acquiring Playdom and PopCap Games respectively. All one can do is sit back and keep an eye on what is to come with Zynga in the future before making an decision on acquisition.