Zynga’s Irish operation makes €37.6m loss

Zynga, the developer of Farmville, Cityville, Words With Friends and other online social games, made a pretax loss of $50.8 million (€37.6 million) in its Irish operation last year, after impairment charges dragged it into the red.

Accounts for Zynga Game Ireland filed at the Companies Office show that the company’s revenues increased to almost $512 million in 2012, up from $369 million the previous year. The figures i highlight the importance of Zynga’s Irish operation to its San Francisco-based parent company Zynga Inc, which recorded revenues of $1.28 billion in the same period.

Zynga Game Ireland recorded an impairment charge of $27.8 million on its investment in a Japanese subsidiary and a $28.7 million charge on intangible assets. This second charge followed the downward revision of the value of the intellectual property of OMGPOP, the social game provider purchased by Zynga in March 2012.

The global operation recorded a total impairment on intangible assets of $95 million in 2012, according to company earnings published in February. The world’s biggest developer of online social games made a net loss of $209 million for the period.

Zynga first opened its Dublin office in 2010 and it is its biggest operation in Europe, with employees at the site working in multilingual customer support, community management and other functions.

The documents for the Irish operation show that it made an operating profit of $5.3 million, up slightly from $5.15 million the year before. It paid income tax of $1.39 million, up from $869,000 in 2011. The accounts also note that the company employed an average of 57 people, up from 54.

However, Zynga’s expansion has stumbled in recent times. In June, the company announced it would cut 520 jobs from its global workforce, or 18 per cent of its total staff, and close game studios in Los Angeles, Dallas and New York, amid disappointing results from its titles outside the Farmville franchise.

The Irish accounts estimate severance costs of $475,000 in relation to the redundancy of four employees since the year end.

Zynga, led by chief executive Don Mattrick, publishes its third-quarter earnings figures on October 24th. The company has been forced to compete in recent times with the ascendant King, maker of the Candy Crush Saga, which this year overtook Farmville 2 as the most popular game on Facebook.

Among the risk factors noted by the directors of Zynga Game Ireland are “the short operating history” of the company and the nature of its business, which “make its revenues difficult to predict”. They also cite the “increasingly competitive environment” for the social game industry, its dependence on social networks and its “reliance on a small portion of total players” of its games for nearly all of its revenue.