Sorry, “lossofprofits” is not an acceptable word
Zynga Inc (NASDAQ:ZNGA) is the most popular and prolific mobile games provider. According to comScore, more users play Zynga mobile games than the next five mobile game developers combined. Will the Hasbro, Inc. (NASDAQ:HAS) and EA deal give Zynga Inc (NASDAQ:ZNGA) a reason to watch its back?
In spite of its popularity, Zynga, the developer of “FarmVille” and “Words with Friends,” just can’t seem to please investors.
Notably, the company is weak in several areas, including operating cash flow and a poorly performing stock. In the most recent quarter, Zynga Inc (NASDAQ:ZNGA) saw revenue fall 30% to $230 million from $329 million a year ago. Net income was $4.1 million, a much needed improvement over last year’s loss of $85.4 million.
The number of monthly active users took a 13% nosedive to 253 million. This figure peaked at 331 million monthly active users at the end of the third quarter of 2012.
The company recently laid off 18% of its workforce (520 employees). While this is bad news for the employees, it is relatively good news for investors if the company is able to save the $70-$80 million annually that it projects.
Yahtzee!
So if the Hasbro deal will help EA, why hasn’t it helped Zynga?
The Hasbro, Inc. (NASDAQ:HAS)-Zynga Inc (NASDAQ:ZNGA) deal is to develop new games. The EA deal is to make already popular Hasbro games digital–something fans and consumers have wanted to see happen for a long time.
EA develops a wide variety of digital or video games, while Zynga is a mobile game provider, mostly dependent on Facebook for success. Facebook retains 30% of the earnings Zynga Inc (NASDAQ:ZNGA) games bring in, which comes to about 15% of Facebook’s revenue. If Facebook isn’t bringing the users in to Zynga, or Facebook users block the games and move on, Zynga Inc (NASDAQ:ZNGA) has few ways to expand and improve performance.
Who won the game?
Digital and mobile gaming are still incredibly new fields, particularly for investors. More tried, tested, and true companies like Hasbro, Inc. (NASDAQ:HAS) and Disney are safer bets. But look around at how many people are playing a Zynga or EA game on a mobile device near you, and you will see that mobile gaming is here to stay. More risky investors may see a significant payoff in the future with a mobile gaming investment in Zynga Inc (NASDAQ:ZNGA). EA still has much to prove, but appears to be on track for a good payoff down the road.
Erin McBride has no position in any stocks mentioned. The Motley Fool recommends Hasbro and Walt Disney (NYSE:DIS). The Motley Fool owns shares of Hasbro, Inc. (NASDAQ:HAS) and Walt Disney.
The article Which Mobile Game Is the Most Popular? originally appeared on Fool.com.
Erin is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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