Diane is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Zynga (NASDAQ: ZNGA) the San Francisco based company that provides online social games services, has been anything but a winner for shareholders since going public Dec. 16, 2011.
Priced at $10, shares peaked at $15.91. But since that lofty level, the stock has been a loser, hitting a low of $2.09 and currently changing hands around $2.60.
In attempts to stage a turnaround, Zynga has reduced headcount, shuttered studios and retired some of its older games that no longer have a strong following. Some 13 underperforming titles were shutdown or closed to new players while the company encouraged gamers to try Zynga’s other and fresher games.
Shedding aging games is a smart move. Videogame maker Electronic Arts (NASDAQ: EA) showed just what a drag out-of-favor games and consoles can do to a bottom line. The company recently reported a weaker than expected quarter weighed down by older, existing consoles and held back as consumer wait for new games to become available. The maker of games like “Medal of Honor” endured a challenging holiday quarter, usually one of the company’s most robust seasons.
New challenges facing Zynga is the recent departure of chief games designer Brian Reynolds, who also founded the company’s studio in Baltimore. Reynolds up and left with no public explanation. His exit rattled already rattled investors.
This year could be win or lose for Zynga. Key to success could be plans to enter the real-money online gambling business outside the United States (only a few states allow online gambling).
Expected in the first half of 2013 is a suite of actual money casino games in collaboration with Bwin.Party. Games set to be launched include roulette, slots, blackjacks and poker. Anticipation is growing for the launch. If well received, the joint venture could be fruitful for both parties as well as gamers.
Expansion plans for this year also include branching out into licensed board games. More mobile game apps are also on tap.
Moving heavily in mobile is a smart move. Look what it has done to Facebook’s (NASDAQ: FB) bottom line.
The social networking behemoth, who once had a special relationship with Zynga over the years affording the social game provider special access to Facebook users, is morphing into a mobile company in efforts to cash in on the explosive arena.
In earnest attempts to monetize its 1 billion members who continue to access the site more frequently via smartphones and tablets, Facebook’s main focus now is mobile. Boasting the No. 1 app in the U.S., Facebook has recognized the increasing traffic to its site from mobile devices and plans to take advantage of the growing trend.
If Zynga can succeed in garnering a loyal and steady user base through mobile, there could be high hopes for the company.
Zynga has a healthy cash stockpile that should allow it to run for a while, and its business model is at least breaking even.
There has been plenty of chatter that Zynga is a takeover target, but that's never a good and sole reason for buying a stock. But a betting person might wager on better days for Zynga.
The odds appear in Zynga's favor after the company reported an unexpected profit for Q4 2012, beating on both earnings and revenue. The gains suggest Zynga is successfully focused on its future. Shares soared more than 5% following the earnings report.
Goosing shares prior to the release was an upgrade from Bank of America to a "Buy" from an "Underperform."
Zynga is far from out of the woods, buy it looks like the company is wisely playing the hand it’s been dealt.
If you do plan on playing with Zynga's stock, take heed of an old Chinese proverb, "Decide on three things from the start: the rules of the game, the stakes, and quitting time."
DianeAlter has no position in any stocks mentioned. The Motley Fool recommends Facebook. The Motley Fool owns shares of Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!