Zynga craps out: Plan to bag gambling in US sinks stock

Zynga’s new CEO is not a gambling man.

Don Mattrick, the former Microsoft Xbox executive who replaced founder Mark Pincus this month, said the maker of “Farmville” and “Zynga Poker” would ditch its pursuit of real-money gambling in the US.

Some investors were hoping that a real betting business would be the key to reviving the company even though strict laws and unworkable regulations made it a long shot in the US.

“Zynga believes its biggest opportunity is to focus on free-to-play social games,” the company said in its earnings statement yesterday. “While the company continues to evaluate its real money gaming products in the United Kingdom test, Zynga is making the focused choice not to pursue a license for real money gaming in the United States.”

In April, Zynga, whose once-popular games are shedding users, started testing gambling in its casino games across the pond, sending the stock up 15 percent. After the company’s about-face yesterday, shares plunged 14 percent to $3 in after-hours trading — right around where they were trading before its casino ambitions boosted the stock.

To be sure, Zynga’s troubles run deeper than its lack of a future in gambling. The company went public at $10 a share in late 2011, and promptly tanked.

Zynga entered a period of extended decline, marked by fewer hit games, a mobile strategy that came too late and failed acquisitions.

In the latest quarter, Zynga’s daily active users fell to 72 million from 39 million a year ago. The last time user levels were this low was in 2010.

Last quarter’s revenue was also the worst since 2010, down 31 percent from a year ago to $231 million. The company projected revenue as low as $175 million in the current quarter.

Mattrick promised to outline a strategic overhaul within 90 days, but warned investors to expect more “volatility in our business … over the next two to four quarters.”