This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

The Deal: Stagnating Zynga Lowers Borrowing Limit

NEW YORK ( The Deal) - Zynga (ZNGA - Get Report), the online and mobile gaming company behind popular titles such as Farmville and Words With Friends, has quietly lowered the borrowing limit on its revolving credit facility to $200 million from $1 billion, signaling that it's not likely to make acquisitions to rev up its stagnating business.

San Francisco-based Zynga raised a big red flag when it laid off 18% of its workforce, or about 520 employees, on June 3. Now, according to a June 24 filing with the Securities and Exchange Commission, the company has amped up its cost-cutting program by reducing the borrowing limit on its revolver.

Lowering the borrowing limit will save Zynga money, since the company has to pay quarterly fees related to the untapped borrowing capacity on the credit facility. Zynga said no loans have been made under the credit agreement.

The original loan, issued on July 20, 2011, by lenders Morgan Stanley (ZNGA - Get Report), Goldman Sachs (GS - Get Report), Bank of America (BAC) and JPMorgan (JPM), came at a more optimistic time.

Back then, Zynga was reportedly considering a bid for PC and mobile game developer PopCap Games Inc., which was acquired by Redwood City, Calif.-based Electronic Arts Inc. (EA) in a July 12, 2011, deal worth up to $1.3 billion.

Since then, Zynga has made smaller acquisitions. The company bought fellow game developer OMGpop Inc., which makes the mobile game, Draw Something, for about $200 million on March 21, 2012. That acquisition, however, didn't help Zynga grow its business.

In fact, among the layoffs Zynga announced were OMGpop workers in New York City. Zynga still has the Draw Something game, but it no longer has the hope of another blockbuster game coming out of that office, which is now closed.

According to Rob Enderle, principal analyst at San Jose, Calif.-based Enderle Group, Zynga has about 12 to 18 months to find a viable business strategy -- and it won't be easy. Enderle said in a Tuesday phone interview that Zynga's reliance on Facebook Inc. (FB - Get Report) as the main platform for marketing and distributing games is a big problem.

"They've hit the Facebook iceberg, and they haven't figured out how to recover," Enderle said, referring to Zynga's loss of market share on Facebook.com. "They have to develop more business outside of Facebook."
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
ZNGA $2.48 -0.20%
FB $94.44 0.46%
GS $204.84 -0.11%
MS $38.83 -0.03%
YHOO $36.91 0.65%

Markets

Chart of I:DJI
DOW 17,623.48 -66.38 -0.38%
S&P 500 2,100.44 -3.40 -0.16%
NASDAQ 5,123.9330 -4.3480 -0.08%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs