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Zynga Inc (NASDAQ:ZNGA) To Face Competition From Gaming Console Sales? – SNE, MSFT

Boston, MA 11/26/2013 (wallstreetpr) – Zynga Inc (NASDAQ:ZNGA) must be looking at the current releases of gaming consoles both by Sony Corporation (ADR) (NYSE:SNE) and Microsoft Corporation (NASDAQ:MSFT) with some dismay. Both the companies managed to sell more than 1 million consoles each within 24 hours of release. This is not surprising considering that both the companies are releasing new consoles at least after a break of six to seven years.

Zynga Inc (NASDAQ:ZNGA) develops games for the social media segment. The company faces multiple threats

  1. From other developers in the social media segment.
  2. From developers of games aimed at the smartphone segment or even PC segment.
  3. From console manufacturers.

With more and more people preferring smartphones over PCs, this social games developer also needs to address this niche. The company needs to develop its games for the smaller screen size of smartphones. The gaming industry as a whole is expected to increase from $66 billion to $78 billion by 2017.

Zynga Inc (NASDAQ:ZNGA) is well aware of the threats. The hiring of Don Mattrick as CEO was a decision taken to ensure that the past mistakes are corrected. Don is working on restructuring the company and bringing the focus back into its core competencies. The first quarter under his leadership saw the company lose 36% in revenues y-on-y. Daily active users declined by 49% while monthly active users declined by 57%. The company spent $7 million in restructuring costs, a very positive sign. With $1.52 billion in cash and cash equivalents, Zynga still has scope for improving itself without worrying about cash to fund its growth.

The new CEO will require time to restructure the company. Zynga Inc (NASDAQ:ZNGA) is already committed to reduction in operating expenses and rolling out new games. Its zero debt and cash balance of $1.52 billion on a market capitalization of $3.52 billion can ensure that the company has sufficient leeway to right itself.

Published by Alan Masterson

Alan has over 25 years of trading experience in the U.S. equity markets. He began his career in finance working on a program trading desk specializing in over-the-counter stocks. His career progressed from that point to his current position as senior trader on an institutional trading desk. In the evenings, Alan teaches economics at a local community college. He has contributed articles to various publications over the last six years, including feature articles for an economics magazine and various financial blogs. You may contact Alan via his email ([email protected]) or his Google+ page (https://plus.google.com/103338576216002376250).

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