Zynga Inc. has officially announced its plans to abandon its long running efforts to build a real-money gaming business in the United States. This comes as surprising news to many investors who saw the direction of real-money gambling as the struggling company's one and only lifeline. This has caused stocks to plummet. However, new chief executive Don Mattrick seems to have a different direction in mind for the company.
Mattrick, former Microsoft Corp Xbox leader replaced Zynga founder Mark Pincus as chief executive earlier this month. He said the company needs to go back to basics and even planned for two to four quarters of volatility as the company "resets" its business plan, reports Reuters.
The company, made popular for its social games like "Words with Friends" and "Farmville," saw shares dived 14 percent to $3.02 in afterhours trading. Another way to look at that is 70 percent of its $10 initial public offering price.
"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."
According to insiders, the reason for the massive jump ship was because when the company announced that investors, who were previously under the impression they would be tapping into a revenue stream as lucrative as real-money online gambling, were not only going to have to ditch those dreams but would have to sit through two to four "volatile years." This is just one of many withdrawal scenes that have seen the company steadily lose clout and endorsements on Wall Street.
The company reported its quarterly results on Thursday that were mostly in-line or better than investors' already extremely low expectations. Zynga reported $231 million in quarterly revenue, a 31 percent drop from last year.
