Zynga Gets Boost From Legalized Gambling

Andrew Klips  |

Shares of online game maker Zynga Inc. (ZNGA) continued to climb on Monday amid a bloody red day for the wider markets as investors see the legalization of online gambling in Nevada and the consolidation of operations as good for the future of Zynga.  The Dow Jones Industrial Average started the day with modest gains, but plummeted into triple-digit losses that were accelerating into the close before a mercy killing from the final bell left the blue chip index lower by 216.4 points (-1.55%).  The broader S&P 500 didn’t fare any better, shedding 27.75 points (-1.83%).  The tech-rich Nasdaq languished as well with Apple diving nearly 2 percent on the day, helping drag the index down 45.57 points (-1.44%).

San Francisco-based Zynga, who makes popular games like “Words with Friends” and “Farmville,” saw shares reverse course from a 7-day downtrend last Friday following Nevada becoming the first state in the union to approve a law allowing Nevada-based companies to host gambling activities for residents in other states.  Nevada Governor Brian Sandoval signed the legislation late Thursday.

In what could prove to be a prescient move, Zynga applied for a gaming license in Nevada in December.

New Jersey is expected to pass their own legislation this week to allow online, real-cash gambling.  The bill was originally shot down by Governor Chris Christie earlier in the month, citing a few changes he wanted to see in the bill.  Lawmakers have said they are willing to make the changes and Christie has said he’ll sign it that day if they do.

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The domestic efforts complement a deal Zynga struck last year with Bwin.Party to provide real money online gambling to residents of the United Kingdom.  Currently, Zynga has the websites, called Zynga Poker Plus and Zynga Plus Casino, live as landing pages to harvest emails for future players and promote the brands.  The sites are slated to go live in the first half of 2013.  Once active, only residents of the U.K. 18 years or older will be allowed to play.

In an attempt to further streamline operations, Zynga said today that it is shuttering it Baltimore office, birthplace of the game FrontierVille, and cutting its overall staff of 3.058 by about 1 percent.  The Baltimore studio employs less than 50 people, part of which will be relocated.  Zynga is also shuffling employees at its offices in Texas and New York to continue to cut expenses.

Last October, Zynga said (and has now followed-through on) that it was (and has now followed-through on) slashing 5 percent of its staff and closing it operations in Boston and Tokyo.

While these decisions are always difficult, these steps will affect approximately 1% of our workforce and enable us to focus our resources on the most significant growth opportunities,” said Zynga chief operations officer David Ko in a statement.

Zynga’s ongoing efforts were rewarded by topping Wall Street expectations for the fourth quarter as net losses contracted and revenue expanded more than analysts thought they would.

Shares have been pounded to the tune of losses around 75 percent over the past year, but have managed to climb 65 percent from all-time lows of $2.09 in November, including today’s 7.5-percent advance to close at $3.43.

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