By Jon Swartz, @jswartz
SAN FRANCISCO - Game over for Zynga?
Hardly, if the social-gaming company's fourth-quarter results are any indication. Just when many direly predicted that things were at their darkest, the company offered strong evidence today that it's still in the game.
The company, which has been lambasted for months, reported surprisingly strong revenue of $261 million, prompted a 8% hike in its stock in after-hours trading Tuesday.
STORY: Zynga blows past Street expectations
Analysts polled by Thomson Reuters expected a loss of 3 cents per share on revenue of $212 million. In the same quarter a year ago, Zynga earned 5 cents per share on revenue of $306.5 million.
Many were expecting the worse, for several reasons. In its 5-year operating history, Zynga's accumulated deficit is $555 million.
At the same time, Zynga is losing key executives just as quickly. Last week, its chief games designer, Brian Reynolds, bolted. In recent months, Zynga lost its chief operating officer, chief marketing officer and the general manager of FarmVille departed.
Meanwhile, a pack of upstarts -- led by King.com -- carved out promising niches in a mobile market coveted by Zynga.
There are promising signs, however. In the fourth quarter, Zynga saved money by whacking R&D costs. What is more, Some 60 million people played Zynga games daily in the third quarter, up 11% from a year ago.
Sterne Agee analyst Arvind Bhatia, citing market researcher AppData, notes that for the first time in several quarters daily-active users for "invest and express" games like FarmVille 2 grew 14% from the previous quarter.
Zynga is betting its future, literally, on online poker. Admittedly, that's a tough nut to crack. Even if online poker was legal in the U.S., Zynga would face stiff competition from casino operators and manufacturers of video poker systems.
"Online gambling represents a burgeoning area of growth for social games companies, and one that may potentially prove many times more lucrative should legalization be approved," says Scott Steinberg, an analyst at Tech Savvy Global.
While legalized gambling outside of European territories represents a possible boon to companies such as Zynga, its widespread acceptance still remains far from a certainty, Steinberg says.
Despite today's stock bump, Zynga's stock is still sputtering. Shares, which closed at $2.74, are more than 70% below its initial public offering price at the end of 2011. (Zynga announced its results after markets closed today.)
Zynga CEO Mark Pincus, the brash and demanding entrepreneur who started the social-gaming company, has been fingered as a prime culprit for its underwhelming stock. To those who resented his bravado and bluster, the past several months were considered karmic payoff.
Yet today, he was granted a quarterly reprieve. There might still be life left in Zynga.