Ahead of the Bell: Zynga

Zynga share surge in premarket on acquisition news, job cuts

Associated Press

NEW YORK (AP) -- Zynga spiked 20 percent before the opening bell Friday after it moved to acquire another mobile-game maker and announced that it would trim 15 percent of its work force as it tries to regain its footing.

The company will pay $527 million for NaturalMotion, which produces the hit mobile games "CSR Racing" and "Clumsy Ninja.

Zynga has struggled to catch up with potential users as they shift from computers smartphones and tablets. The company's biggest hits, including "FarmVille" and "Mafia Wars," have mostly been played on desktop and laptop computers. NaturalMotion could give the company a bump in that direction.

The company said it would cut about 314 jobs with the expected savings of $33 million to $35 million this year.

Zynga Inc., based in San Francisco, also released fourth-quarter results late Thursday, a week earlier than scheduled. Losses were slightly smaller than analysts expected, but a drop-off in revenue was worse than most had projected.

Evan Wilson of Pacific Crest Securities said he's more optimistic about Zynga's prospects in light of the surprise acquisition and smaller-than-expected loss. However, he will remain on the sideline, Wilson said, until a clearer picture of the company's profit potential emerges. He backed a "Sector Perform" rating on the stock.

Jordan Rohan of Stifel Nicolaus, who stood by his "Hold" rating on the stock, said the company is making a very big bet on NaturalMotion, noting that its profit contribution will be limited this year.

In premarket trading, Zynga shares rose 70 cents, or 20 percent, to $4.26.

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