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Zynga posts smaller-than-expected loss, will cut workforce

Thursday, 30 Jan 2014 | 4:05 PM ET
Zynga headquarters in San Francisco
Getty Images
Zynga headquarters in San Francisco

Social game maker Zynga surprised Wall Street by posting earnings that, while still a loss, beat expectations. It also said that it would lay off 15 percent of its workforce and that it is buying a U.K.-based mobile game company.

A week ahead of its scheduled earnings announcement, Zynga posted fourth-quarter revenue of $147 million, which is $6 million better than expected but still down from $261 million in the year-earlier quarter. A quarterly loss of three cents was a penny better than analysts projected.

User numbers aren't pretty and continue to decline across the board. Daily active users were down 12 percent from the third quarter, while monthly active users declined 16 percent. One piece of good news: Gamers who stuck around are paying more. Average daily bookings, or payments, per average daily active user rose 10 percent between the third and fourth quarters.

They company also said it would cut 15 percent of its workforce, or 314 employees.

"We took layers out of the reporting structure, we got more focus more discipline," CEO Don Mattrick said. "We feel like we've made a lot of progress to achieve future growth in 2014."

(Read more: Bitcoin breaks $1,000 after Zynga opts in)

Zynga also announced its biggest acquisition yet. The company is buying Natural Motion, a mobile game and technology company in the U.K., for $527 million in cash and stock.

In a phone interview, Mattrick said that Natural Motion's combination of hit mobile games "CSR Racing" and "Clumsy Ninja," and of technology will "accelerate Zynga's move to mobile and the growth of the company."

"Natural Motion has built core content that can build and scale, as well as breakthrough technology and tools that Zynga now owns the exclusive rights to," he said. "Natural Motion has products that when you see them you just want to download them and participate with them, an organic 'wow' factor to what they've created."

The coming year will be marked by a transition to mobile, Mattrick said. Seventy-five percent of all new projects will be mobile first, more than half of its revenue will come from mobile at some point this year and the game FarmVille will move to mobile devices in the second quarter.

Zynga's outlook for the whole year is generally bullish, as the company projects improvement each quarter. It projects total bookings of between $760 million and $810 million, far exceeding the $629 million estimated of the analysts polled by Thomson.

On the downside, the midpoint of Zynga's first-quarter revenue guidance—between $138 million and $148 million—is less than the $146 million analysts were looking for, according to Thomson One Analytics.

(Read more: Facebook tests ad network business on other companies' mobile apps)

Mattrick expressed no regrets on passing up the opportunity to launch real-money gaming, saying "I think there's huge market opportunity for us in the social casino space."

He is focused on sustaining and expanding proven franchises, creating new hits, and "doing both of the above in an efficient and leveraged way," he said.

The company still will have $1.2 billion in cash after the Natural Motion deal, which offers the possibility to make more purchases, Mattrick said, but the plan is to focus on organic growth.

—By CNBC's Julia Boorstin. Follow her on Twitter: @JBoorstin.

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  • Matt Hunter is the senior technology editor at CNBC.com.

  • Cadie Thompson is a tech reporter for the Enterprise Team for CNBC.com.

  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.

  • Jon Fortt is an on-air editor. He covers the companies, start-ups, and trends that are driving innovation in the industry.

  • Lipton is CNBC's technology correspondent, working from CNBC's Silicon Valley bureau.

  • Mark is CNBC's Silicon Valley/San Francisco Bureau Chief covering technology and digital media.