Zynga projects $105 million loss as OMGPOP's value slides

Writes off up to $95 million on studio

Zynga projects $105 million loss as OMGPOP's value slides
A miscalculation of OMGPOP's worth a the time of the studio's acquisition has hit social giant Zynga hard, with the company projecting losses of up to $105 million for the quarter ended 30 September.

In the firm's latest preliminary financial results for the third quarter, Zynga claims it has had to suffer an impairment charge of between $85 million and $95 million because of "intangible assets previously acquired in connection with the company's purchase of OMGPOP."

Something this way slides

In short, Zynga overvalued OMGPOP's 'goodwill' – i.e. the value of the Draw Something developer's intangible assets.

As such, quarterly revenue is expected to come in at between $300 million to $305 million, leading to an overall loss of between $90 million and $105 million.

Also hitting the company hard is the apparent poor performance of its web-based games, with CEO Marc Pincus pointing to a continued challenging environment for the firm, and the company's failure to "execute to our satisfaction".

"We're addressing these near-term challenges by implementing targeted cost reductions in the fourth quarter and rationalising our product R&D pipeline to reflect our strategic priorities," added Pincus.

"At the same time, we are continuing to invest in our mobile business where we have one of the strongest positions in the industry. These actions support our strategy to transition from being a first party web game developer to a multiplatform game network."

Web woe

In particular, Pincus claims key releases such as The Ville on Facebook have underperformed, though FarmVille 2 has been proclaimed Zynga's "most successful launch since CastleVille" in terms of daily bookings.

"We now offer three of the top five most popular mobile games in the US in terms of time spent according to Nielsen," concluded Pincus.

For the full year, Zynga now expects earnings before interest, taxes, depreciation and amortisation to come in between $147 million and $162 million, down from $180 million and $250 million.

With a fine eye for detail, Keith Andrew is fuelled by strong coffee, Kylie Minogue and the shapely curve of a san serif font.