Troubled games maker Zynga surprised Wall Street on Tuesday, blowing past fourth-quarter revenue forecasts and beating profit estimates, as the company's results underlined mobile advances.
Zynga reported a revenue surprise of $261 million, compared with forecasts of $212 million from the survey of estimates from Thomson Reuters.
"We saw great performance by mobile poker, so we're seeing our franchises do really well," CEO Mark Pincus said on a conference call with investors and analysts. "We're excited on mobile to start connecting these communities more."
Shares of Zynga rose 6.6%, to $2.92, in after-hours trading following the news.
The online games giant reported net income of $6.9 million in the quarter, compared with expectations for a loss of $22 million.
Excluding certain items, Zynga posted a profit of 1 cent a share, besting expectations for a 3-cents-per-share loss.
Zynga said it counts 298 million monthly active users, including 72 million on mobile.
Many were expecting worse, for several reasons. In its five-year operating history, Zynga's accumulated deficit is $555 million.
At the same time, Zynga is losing key executives just as quickly. Last week, its chief games designer, Brian Reynolds, left. In recent months, Zynga's chief operating officer, chief marketing officer and the general manager of FarmVille all departed. Meanwhile, a pack of upstarts -- led by King.com -- carved out promising niches in a mobile market coveted by Zynga.
The quarterly report provided promising signs. In the fourth quarter, Zynga saved money by whacking R&D and shaving its marketing and sales costs. What's more, some 60 million people played Zynga games daily in the third quarter, up 11% from a year ago.
Sterne Agee analyst Arvind Bhatia, citing market researcher AppData, notes that for the first time in several quarters, daily-active users for games such as FarmVille 2 grew -- 14% from the previous quarter.
Also, Zynga is making bets on a future in real-money gambling with online poker. Still, if online poker were legal in the U.S., Zynga would face stiff competition from casino operators and manufacturers of video poker systems. "Online gambling represents a burgeoning area of growth for social-games companies and one that may potentially prove many times more lucrative should legalization be approved," says Scott Steinberg, an analyst at TechSavvy Global.
While legalized gambling outside of European territories represents a possible boon to companies such as Zynga, its widespread acceptance still remains far from a certainty, Steinberg says.
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