Zynga is expanding its offerings for mobile devices, but it's difficult to make money in that space because the barriers to entry are so low. Zynga said in its report for the first quarter of 2013 that Facebook is still the main platform for its marketing and distribution of games. It is trying to capitalize on the success of Words With Friends, which is popular on mobile phones, with its new offering, Running With Friends. However, the competition is stiff.

According to data researcher AppData, King.com has surpassed Zynga as the app developer with the most daily active users on Facebook. King makes games such as Candy Crush Saga, Pet Rescue Saga and Farm Heroes Saga.

When it comes to Zynga's former acquisitive strategy, Enderle thinks those days are over unless Zynga returns to health on its own. "It's hard to acquire yourself out of a problem like this," Enderle said. For one thing, Zynga wouldn't be able to compete for the best properties with larger players such as Electronic Arts and Sunnyvale, Calif.-based Yahoo! ( YHOO). For another, Zynga has a bad track record since it failed to make the OMGpop acquisition work. The company has enough cash to carry it through the next 12 to 18 months, but something needs to change if Zynga is going to survive beyond that timeframe, Enderle said.

If Zynga fails to develop a new blockbuster game, its M&A options as a seller would also be limited. As Enderle points out, Zynga doesn't have a lot of valuable intellectual property, and it's hard to guarantee that talent will sit out an acquisition.

" An acquirer wouldn't be buying much more than the buildings and the furniture," Enderle said.

Morgan Stanley downgraded Zynga to underweight in a June 21 report, citing the gamer's loss of market share and uncertain prospects for future growth.

"Zynga's updated guidance and 18% workforce reduction in early June indicate that its transition may take longer and cut deeper than we thought just a few months ago," the report said.

Still, a new gaming franchise could save the company, Morgan Stanley said. "Zynga could outperform our estimates if it catches lightning in a bottle in the form of a breakout mobile hit," according to the report.

Zynga executives couldn't be reached for comment.

Zynga is also known for its Dec. 16, 2011, initial public offering, which was seen as a harbinger for other social media companies that hoped to go public. The IPO failed to meet expectations, pricing at $10 per share to raise $1 billion. Zynga is listed on Nasdaq under the symbol ZNGA. Its shares were trading at $2.76 midday Tuesday, giving it a market capitalization of $2.2 billion.

Written by Lisa Allen in New York

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