Is Zynga Inc (NASDAQ:ZNGA) Overcautious?

Posted by Lynn Eisler October 2, 2013 0 Comment 1100 views

Zynga Inc (NASDAQ:ZNGA) has finally waved a formal goodbye to the real-money gaming world in the U.S. The company has withdrawn its license application for an interactive gaming-license in Nevada. Last December, the company had been all fired-up to diversify into real-money gaming and had applied for the license then. This license was for social and digital games that would give consumers a cash payout. Don Mattrick replaced mark Pincus as the Chief Executive Officer and the former announced that the company will be dropping its online gaming plans.

Focus time

The game plan is to enhance the existing services instead of trying to move into diversification mode. The company’s 2013 2nd-quarter reports stated that the company believes that its best opportunity lies in social gaming and that is where its focus point will be. The company will continue with its real gaming business in the U.K but chooses not to pursue its license for the same, in the United States.

Not a wise decision

Apart from the fact that the company needs to get its act together and focus on what it possibly does best, is that the size of the online-gambling population in the state of Nevada is not impressive. At the moment, Ultimate Poker and who have operations in Nevada have a total of only 200 users. With this kind of a market, it doesn’t even seem like a wise decision to foray into a hitherto lesser-known business venture.

In its 2013 fiscal Q2, Zynga Inc (NASDAQ:ZNGA) posted a $231M revenue which represented a y-o-y drop of 31% while its net losses stood at $16M. The company of course has been trying several patching measures like cutting costs by downsizing its workforce, removing different games from the app stores and discontinuing close to 11 games. The Nevada-retreat is certain for the company but it will continue with its U.K Zynga Plus Poker which is its real-money gambling online portal.

About Lynn Eisler

Lynn Eisler is a national news reporter focusing on economic issues, data analysis and the financial health of state and local governments. Lynn has been honored with the H.L. Mencken Award for Investigative Reporting, the Champion of Justice Award for reporting on the drug war, and the John Hancock Award for business reporting. Lynn was also a Knight Medical School Fellow at the University of Michigan.

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