Zynga profits drop 90-percent, further threatening its IPO status

The social network gaming giant has seen a massive decline in profits following recent expansions, which could seriously hurt its planned IPO bid.

It hasn’t exactly been an ideal march towards the fabled riches of a successful IPO for Zynga, the maker of social networking games like FarmVille and Texas HoldEm Poker. At one time, the company’s proposed IPO was said to put the value of the company at as much as $20 billion. That may have been a bit inflated, but even at $10 billion, no one involved would need to fly economy class anymore.

But it was a bumpy road from private towards public for Zynga, and the initial push towards IPO was delayed by general market turmoil. The SEC also requested more information from Zynga, which was one of many factors contributing to the company further delaying its IPO bid until later this year.

To add to the problems, Develop is reporting that Zynga has seen a massive drop in profits in the second quarter ending on July 30. In one year, the San Francisco-based company’s profits dropped from $14 million to $1.4 million, a drop of 90-percent.

It isn’t quite as bad as it sounds though. The loss of profits will likely hurt the potential stock price, which in turn could further damage the plans for the IPO, but Zynga’s revenue saw a 115-percent increase in the same period. That suggests that the bulk of Zenga’s money was spent on expenditures to help it expand.

Regardless of the reasons for the drop off, the timing could not be worse. Zynga has two new games on the way that could bolster profits, but the looming IPO may still suffer as a result, and the continued bad news from Wall Street won’t help much either.