Zynga slashes outlook as shares plunge

SAN FRANCISCO (Reuters) - Zynga Inc, the social gaming company, slashed its 2012 earnings outlook after its second-quarter results badly missed Wall Street's targets, sending its stock plunging more than 40 percent to a record low.

The huge miss for Zynga, creator of the "Farmville and "Hidden Chronicles" games, dragged down shares of Facebook Inc, which relies on the game publisher for some 15 percent of its revenue.

Zynga slashed its 2012 earnings outlook to 4 to 9 cents a share, down from a previously projected 23 to 29 cents.

Zynga was a star in the tech world when it debuted on public markets last December. But since then Wall Street has turned its back on the company as it has begun to flounder in the face of intense competition from rival casual games makers and users who have abandoned its predominantly Web-based games for mobile titles.

"The quarter is a disaster," said Sterne Agee analyst Arvind Bhatia. "I think that it's looking more and more like this was a fad because they've introduced so many new games, yet EBITDA continues to come down," he said, referring to earnings before interest, taxes, depreciation and amortization.

"The company has been saying for some time that declining traffic doesn't matter and clearly it does. The decline in some of their top games in terms of traffic has been huge."

Zynga, founded by CEO Mark Pincus, reported quarterly revenues of $332.4 million, below the average analyst estimate of $344.12 million, according to Thomson Reuters I/B/E/S.

Shares in Zynga plummeted 35 percent to as low as $3.00 in after-hours trade, from a close of $5.078 on Nasdaq.

Shares of Facebook slid almost 7 percent to $27.33, from a close on the Nasdaq of $29.34. Zynga is the largest provider of games on Facebook, which is due to report quarterly results on Thursday .

On an adjusted basis, Zynga reported a loss of $22.8 million, or 3 cents a share, compared with a profit of $1.3 million a year ago.

(Editing by Leslie Adler)

Source: http://news.yahoo.com/zynga-misses-second-quarter-revenue-expectations-203903138--sector.html

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