2 Big Reasons Yahoo! Inc. (YHOO) Won’t Buy Zynga Inc (ZNGA)

Page 1 of 2

Zynga Inc (ZNGA)Shares of Zynga Inc (NASDAQ:ZNGA) popped by as much as 11% Monday after Wunderlich Securities analyst Blake Harper suggested it might make sense for Yahoo! Inc. (NASDAQ:YHOO)! to acquire the social game maker.

To be sure, the rumor mill has been buzzing ever since word got out last week that Jackie Reses (Yahoo! Inc. (NASDAQ:YHOO)’s head of mergers and acquisitions) let it slip to employees that the company was working on two “significant” acquisitions.

Unfortunately for the Zynga Inc (NASDAQ:ZNGA) bulls, I just don’t see a buyout happening for myriad reasons. For the sake of brevity, however, here are two of the biggest things that would make Yahoo! think twice about entering the social gaming space via Zynga.

Sure enough, shares of Zynga Inc (NASDAQ:ZNGA) lost ground Tuesday after analysts at Macquarie Capital poured cold water on the buyout thesis, saying “We believe that Zynga Inc (NASDAQ:ZNGA) is unlikely to be acquired anytime soon, as we don’t believe that Mark Pincus wants to sell at this time.”

Yep, that’s the same Mark Pincus named The Motley Fool’s Worst CEO of the Year in 2012. Still, even if Yahoo! actually wanted to buy his company, would you blame him for not wanting to sell? After all, Yahoo! CEO Marissa Mayer has been taking flak this week for her notoriously stringent hiring standards and, given Pincus’ painful past transgressions, something tells me any Zynga buyout scenario likely wouldn’t involve keeping him around.

Then again, perhaps that wouldn’t be much of an issue anyway, since Pincus hasn’t shown much restraint with regard to dumping his own personal stake in his company. Nonetheless, his persistent demonstrations of a lack of faith in Zynga don’t bode well for its prospects, especially when we remember eight of its high-profile executives voluntarily packed their bags last year between August and September.

All things considered, none of this is particularly encouraging to potential suitors.

Stronger, cheaper acquirees
With Zynga’s market capitalization at just under $3 billion, Yahoo!’s $4 billion in cash and liquidity (as of the end of 2012) would require a good amount of their dry powder to acquire the company outright. Even accounting for Zynga’s own veritable cash pile of $1.3 billion, the fact remains Zynga Inc (NASDAQ:ZNGA) is still barely profitable. In addition, I’m hardly alone in believing its business is simply unsustainable over the long run.

Besides, Harper’s mention of Zynga Inc (NASDAQ:ZNGA) seemed more of an afterthought following more serious speculation about why it might make sense for Yahoo! to purchase smaller companies like restaurant reservation specialist OpenTable Inc (NASDAQ:OPEN) or review provider Yelp Inc (NYSE:YELP) — the respective market caps of which are significantly lower ($1.4 billion and $1.5 billion).

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 44 percentage points in 21 months Learn how!

Lists

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Top 6 Things You Can Do To Increase Your Productivity

Top 9 Trending Smartphones in 2013

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!