With $1.6 Billion in Cash, Zynga Is Now Worth Less Than $750 Million to Investors
After it announced layoffs of 520 employees and lowered its guidance to Wall Street, Zynga’s stock dropped precipitously yesterday, down 12 percent, to dip below $3 a share.
The decline put the market value of the company at just $2.34 billion, well below the once much-hyped hopes for the San Francisco-based online gaming company that has seen nothing but troubled times since its IPO. In fact, since its late 2011 public offering, Zynga shares are down close to 70 percent.
But perhaps more interesting is that, with $1.6 billion in cash and marketable securities, investors now consider the company to be worth just below $750 million.
In other words, about $350 million less than Yahoo just paid for the blogging platform Tumblr, which has substantively less revenue than Zynga.
That small valuation puts the company in an interesting position, as it seeks to move its business more quickly into the mobile space, as its Web-based business has fallen off more dramatically than expected. Simply put, mobile monetizes less robustly than Zynga’s Web offerings.
The slowness in moving its casual social games to fast-growing new devices, such as tablets and smartphones, has been at the heart of Zynga’s current troubles, forcing management to cut its staff by 18 percent in order to rationalize costs.
That has meant the slashing of its staff of more than 3,000 — which grew quickly via a series of acquisitions made in recent years — and closing offices in New York and Los Angeles to save money.
What happens next will be the subject of much speculation, given its declining worth, including whether Zynga might consider going private or if some other company might contemplate acquiring it.
Most sources close to the company think it is unlikely that its big owners, including venture firm Kleiner Perkins, will want to conduct any kind of dramatic transaction, given Zynga’s currently prone state. Said one person close to the situation, its eventual state will depend on how well the company manages to turn itself around.