With New CEO Mattrick At Helm, Zynga Reports Loss of $16M And Revenue Decline Of 31%

Zynga’s revenues for the second quarter of 2013 declined 31% year-over-year to $231 million in the midst of a challenging transition that saw former CEO Mark Pincus hand over the reins to Don Mattrick.

The company had a net loss of $16 million compared to last year’s net loss of $22.8 million during the same quarter (which also had $95.5 million of stock-based compensation expenses). If you account for that then, the company’s net loss was $6.1 million compared to last year’s net loss of $4.6 million based on non-generally accepted accounting principles. Zynga said when it laid off nearly 20 percent of its staff last month that it expected to see a net loss of between $39 million to $28.5 million so this is actually a slight earnings beat.

“We need to get back to basics and take a longer term view on our products and business, develop more efficient processes and tighten up execution all across the company,” wrote Mattrick in the release. “We have a lot of hard work in front of us and as we reset, we expect to see more volatility in our business than we would like over the next two to four quarters.”

Last quarter, COO David Ko said the company was in the midst of a “pause” to re-evaluate its entire game slate and that this decision would be financially apparent in this quarter.

This quarter’s revenue is projected to be even lower in the range of $175 million to $200 million, with a net loss of $43 million to $14 million.

Through the company’s pivot onto iOS and Android, Zynga has had to compete against older and historically smaller rivals from the Facebook platform like King and Kabam. Both of those companies have fared well with King’s Candy Crush Saga bringing it the top grossing spot and numerous Kabam titles in the top 25.

In contrast, Zynga just has its longstanding Poker franchise in the U.S. top grossing 25. Even today, nearly 70 percent of the company’s monthly active users remain on the web.

The losses in Zynga’s user base from not being able to hold onto its core Facebook customers are staggering. The company’s level of daily active users is not much higher than half of where it was a year ago at 39 million this quarter compared to 72 million in 2012. It also saw 187 million monthly active users, down from 306 million users in the same time period a year before.

The company’s launches like Draw Something 2 have also underperformed without any slots in any of the top 100 charts and Zynga’s other big mobile launch, Running With Friends, remains in 45th place in the U.S. top grossing chart. Zynga had six major releases this quarter including War of the Fallen, Draw Something 2, Battlestone, Solstice Arena and Running With Friends.

But older franchises like FarmVille and FarmVille 2 continue to do well as both games have grown combined bookings by 29 percent year-over-year.

Zynga’s struggles in diversifying away from Facebook and missing the pivot to mobile ultimately convinced Pincus to give up the CEO role, although he remains chairman of the board and serves as chief product officer. It’s now Mattrick’s 15th day on the job.

Samsung Q2 Profits Up 47.5%, But Operating Profit At Its Mobile Division Slows

As the worldwide smartphone market slows, Samsung’s second-quarter earnings showed that it is beginning to feel the pressure despite being the world’s top smartphone vendor.

Samsung said its Q2 2013 operating profit increased 47.5% to $8.5 billion, in line with the company’s own estimate. Operating profit at its mobile division, which accounts for two-thirds of the company’s revenue and is its biggest earnings driver, rose 52% to 6.23 trillion won ($5.6 billion), but fell 3.5% from the previous quarter.

The reporting period included the launch of the Galaxy S4, Samsung’s flagship phone and its main rival to the iPhone. One month after the Galaxy S4 s launch, Samsung said it’d hit a record 10 million channel sales, but the Korean tech giant is under the same challenges as Apple thanks to a slowing global smartphone market and shrinking margins. Earlier this week, Apple reported weaker international sales, due in large part to a dramatic revenue plunge in China.

Samsung said that smartphone sales will continue to be slower in the third quarter.

“Entering into a typically strong season for the IT industry, we expect earnings to continue to increase,” said Samsung head of investor relations Robert Yi in a statement. “However, we cannot overlook delayed economic recovery in Europe and risks from increased competition for smartphone and other set products.”