Zynga Inc (NASDAQ:ZNGA) released an extremely disappointing second quarter results today that sent the stocks plunging 33 percent. The developer of popular games like Mafia Wars, FarmVille, CityVille, CastleVille, Word With Friends, reported a turnover of $332 million, a 19 percent increase from the same quarter last year. During the April-June quarter, the San Francisco-based company lost $22.8 million or -3 cents per share.
Analysts were expecting a net sales of $344.8 million and 6 cents per share for the quarter. In the financial year 2011, the company recorded a turnover of $1.2 billion and loss of $404 million. The company’s userbase has grown to over 300 millions in second quarter this year, and seven of the top ten games on Facebook are from Zynga.
However, the company’s stock prices have tumbled with every negative news about Facebook Inc (NASDAQ:FB). About 93 percent of Zynga Inc (NASDAQ:ZNGA)’s revenue comes from Facebook, therefore investors immediately conclude that a Facebook fallout will directly affect the social gaming company.
Its share prices declined after Facebook’s botched IPO on May 18. The stock prices fell from 52-week high of $15.91 in March to $4.91 on Tuesday. Adding to worries, the new App Center of Facebook, a common place for all the games, will further hurt Zynga. Earlier, people usually hopped on to Zynga games because they were easy to be discovered, not because they were the best games.
Zynga very well realizes that depending heavily on Facebook can hurt it badly. That’s why it has lowered its outlook for 2012. “We are lowering our outlook to reflect delays in launching new games, a faster decline in existing web games due in part to a more challenging environment on the Facebook web platform, and reduced expectations for Draw Something,” the company said. Draw Something is a sketch game developed by OMGpop, a company Zynga acquired in a $180 million cash deal in March.
In future, the company is likely to keep depending on Facebook Inc (NASDAQ:FB) for a huge part of its revenues. But Zynga Inc (NASDAQ:ZNGA)’s stock prices will automatically start their upward motion, once it begins to lessen its reliance on Facebook. Maybe by shifting towards mobiles, smartphones and tablets?