Social-game maker Zynga (NASDAQ:ZNGA) had a bad week, mostly as shares got crushed on Thursday. The sell-off was in response to comments from CEO Don Mattrick at an investing conference on Wednesday. Freshly public rival King (UNKNOWN:KING.DL) has EBITDA margins of around 40% right now, which is dramatically higher than Zynga's current level of profitability. Mattrick acknowledged that the company needs to perform better, but that this year is about investing in future growth.
Zynga's popular FarmVille franchise has been key to its rise over the years, but the company dragged its feet with bringing the title to mobile platforms. FarmVille 2 was launched just months ago, while Supercell launched its competing Hay Day back in June 2012. That's helped Supercell grow tremendously when combined with Clash of Clans.
Management turnover has also been a red flag, which predates Mattrick's tenure. Even under Mark Pincus, Zynga's C-suite was a revolving-door affair. That may be over, as Mattrick has finalized his management changes and the company has laid off a large portion of its staff to cut costs.
In this segment of Tech Teardown, Erin Kennedy discusses Zynga's drop with Evan Niu, CFA.
(Relevant segment begins at 8:48.)
Erin Kennedy owns shares of Apple. Evan Niu, CFA, owns shares of and has options on Apple. The Motley Fool recommends and owns shares of Amazon.com and Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.