UPDATE 2-Zynga folds on U.S. gambling bet, shares fall
SAN FRANCISCO, July 25 (Reuters) - Zynga Inc said on Thursday it will largely abandon its long-running efforts to build a real-money gaming business in the United States, a prospect observers had believed to be the struggling company's sole, tenuous lifeline.
"Zynga is making the focused choice not to pursue a license for real money gaming in the United States," the company said in a statement. "Zynga will continue to evaluate all of its priorities against the growing market opportunity in free, social gaming, including social casino offerings."
The announcement, which came on a day when Zynga reported quarterly results mostly in line with investor expectations, sent its shares down 13 percent to $3.05 in after hours trading.
Over the past year, Zynga's business model has rapidly crumbled while it continued to lose online gamers to rivals. Executives have pleaded for time to turn around the company, arguing to investors that greater fiscal discipline and execution would stabilize Zynga's position, while its foray into casino-style, real-money gaming could pay off handsomely in the long run.
That thinking has changed in recent months within the company's upper echelons, with founder Mark Pincus and his replacement as chief executive, Don Mattrick, opting for a return to Zynga's roots with free social games such as FarmVille, which catapulted the company to stardom in 2009.
"We need to get back to basics and take a longer term view on our products and business, develop more efficient processes and tighten up execution all across the company," Mattrick said in a statement.
Zynga reported $231 million in quarterly revenue on Thursday, a 31 percent drop from a year ago, as the struggling game publisher continued to lose gamers.
Zynga said the number of active monthly players dropped to 187 million this quarter from 306 million a year ago, its lowest since mid-2010. The company, which has acknowledged fundamental problems with its business model, went public in December 2011 at $10 a share.
Excluding certain items, Zynga posted a 1 cent per share loss, compared with a 1 cent profit a year ago.
Zynga reported $188 million in bookings, which is a measure of the value of virtual goods bought by players during the three-month period ending June 30. That is a 38 percent drop from $302 million a year earlier.