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Zynga Loss Narrows; Stock Up On Strong Revenue Guidance


Online social games developer Zynga Inc. (ZNGA), said Tuesday its net loss for the fourth quarter sharply narrowed from a year ago, when it incurred a hefty stock-based expense. Revenues were flat, with gaming business taking a hit, partly offset by a jump in advertising income, in a period marked by an increase in daily active game users. Both adjusted earnings and revenue for the quarter came in ahead of Wall Street estimates.

Looking ahead, Zynga said it expects to report a loss for the first quarter, but detailed a strong revenue outlook that is indicated to exceed expectations. Shares of the company, which saw a rally before the markets closed, further gained five percent in after-hours trade on the Nasdaq.

Zynga is the world's largest developer of online social games that are popular on social networking sites such as Facebook Inc. (FB) and on mobile platforms. Its games include Zynga Poker, Words With Friends, Scramble With Friends, and FarmVille.

The company has been facing pressures at its gaming business, with its stock value witnessing steep declines in the last year. To shed excess baggage, Zynga has shut down some games.

It also has amended its relationship with Facebook which will now have the freedom to develop its own games. The deal also means that Zynga will no longer be separately obligated to display Facebook ad units or implement Facebook credits on any such Zynga game pages.

During the quarter, Zynga's daily active users of games rose 3 percent from last year to 56 million, and monthly active users jumped 24 percent to 298 million. Bookings were down 15 percent at $261 million.

Zynga released six new titles during the quarter, including four new titles on web-based platforms, and two new titles on mobile platforms.

The San Francisco, California-based company reported quarterly revenues of $311 million, flat with last year. Analysts polled by Thomson Reuters estimated revenues of $212.11 million.

Online game revenue, which forms most of the revenues, slid 3 percent from last year, while advertising revenues jumped 35 percent.

Zynga reported a fourth-quarter net loss of $48.6 million or $0.06 per share, compared with a net loss of $435 million or $1.22 per share last year.

Results for the prior-year quarter included stock-based expense of $530 million.

Excluding items, earnings for the quarter were $6.9 million or $0.01 per share, compared with earnings of $37 million or $0.02 per share a year ago.

On average, 22 analysts polled by Thomson Reuters expected a loss of $0.03 per share for the quarter. Analysts' estimates typically exclude special items.

For the first quarter, Zynga expects net loss of $0.04 to $0.02 per share, and adjusted loss of $0.05 to $0.04 per share. Revenues for the first quarter are estimated in the range of $255 million to $265 million.

Analysts currently estimate a loss of $0.01 per share on revenues of $240.03 million for the first quarter.

For fiscal year 2013, Zynga is targeting an adjusted EBITDA margin (adjusted EBITDA as a percentage of bookings) of 0% to 10%.

ZNGA closed Tuesday at $2.75, up 7.42%, on a volume of 50 million shares. In after hours, the stock gained $0.13 or 4.73%,. In the past year, the stock trended in a range of $2.09 - $15.91.

by RTTNews Staff Writer

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