Zynga Shares Crumble After Company Says it Won't Offer Real-Money Games in U.S.
New CEO Don Mattrick wants to "get back to basics," but investors apparently disagree with that strategy.
Shares of Zynga were dropping 15 percent after the closing bell Thursday on Wall Street after the maker of digital mobile games like Words With Friends delivered unimpressive financial guidance and disclosed it will scrap plans to enter the lucrative "real money gaming" industry in the U.S.
Zynga reported a second-quarter loss of $15.8 million compared with a loss of $22.8 million a year earlier as revenue fell 31 percent to $230.7 million.
While the results were better than analysts expected, the stock was falling below $3 a share in the after-hours session after having closed the regular trading day up 7 percent to $3.50. The company went public 19 months at $10 a share.
The catalyst for the precipitous fall on Thursday is that the company said it will no longer pursue games in the U.S. whereby users can risk and win real money, though it was still evaluating such a strategy in the U.K.
Also, Zynga said it expects as much as a 9-cent loss in the current quarter while analysts had been expecting about a 2-cent loss.
Newly installed CEO Don Mattrick, formerly of Microsoft, said Zynga needs "to get back to basics and take a longer term view on our products and business."
Zynga said it active monthly users dropped to 187 million from 306 million in the same frame a year ago.
In its earnings report, the company wrote: "Zynga believes its biggest opportunity is to focus on free to play social games. While the company continues to evaluate its real money gaming products in the United Kingdom test, Zynga is making the focused choice not to pursue a license for real money gaming in the United States. Zynga will continue to evaluate all of its priorities against the growing market opportunity in free, social gaming, including social casino offerings."