Zynga Plunges in Premarket

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Znyga Inc. (NASDAQ: ZNGA) futures are plunging this morning following last night's warning on revenue and earnings. In its announcement the company said:

We're addressing these near-term challenges by implementing targeted cost reductions in the fourth quarter and rationalizing our product R&D pipeline to reflect our strategic priorities. At the same time, we are continuing to invest in our mobile business where we have one of the strongest positions in the industry. These actions support our strategy to transition from being a first party web game developer to a multiplatform game network. We remain optimistic about the opportunity for social gaming and the power of our player network of 311 million monthly active users.

What Zynga is counting on is Internet gambling. The company already counts millions of players for its play-for-fun casino games at Facebook Inc. (NASDAQ: FB). Getting Internet gambling back currently depends on state-by-state changes in the law. Zynga and others are ready to pull the trigger as soon as the federal law is changed.

Until then, the company's success depends on gaining more traction in mobile and not over-paying for companies like OMGPOP.

Shares of Zynga are trading down about 21.5% this morning at $2.21, well below the 52-week range of $2.66 to $15.91.

Paul Ausick


Filed under: 24/7 Wall St. Wire, Earnings Warning, Internet Tagged: FB, ZNGA
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