Why Zynga Inc (ZNGA) Could Soon Be Acquired

Activision Blizzard, Inc. (NASDAQ:ATVI) currently has $4.6 billion in cash and no debt, more than enough to comfortably acquire Zynga. Zynga generated $1.2 billion in annual revenue last year, compared to Activision’s $5.0 billion. Based on its 2012 revenue, purchasing Zynga could make social games 19% of Activision’s annual top line. Although that could be too large of a position to bet on social and mobile games, it could turn the attention away from its dwindling World of Warcraft numbers, which spooked investors last quarter.

Just like Microsoft, Activision Blizzard, Inc. (NASDAQ:ATVI) could juice up Zynga Inc (NASDAQ:ZNGA)’s line of mobile games by allowing Zynga to create social and mobile versions of its popular franchises, such as Diablo, Starcraft and Call of Duty. A mobile version of Starcraft, perhaps created as a turn-based strategy game rather than a real-time one, could be a huge hit. A mobile version of Call of Duty or Modern Warfare could usher in a new era of smartphone-based multiplayer first-player shooters. No longer would Zynga be confined to creating lower-budget farming and Scrabble clone games – it would be able to create some triple-A mobile games to fire back at EA.

The Foolish Bottom Line

Microsoft and Activision are only two companies which could potentially take Zynga off the market. Any number of major Asian companies, such as League of Legends creator Tencent, Chinese gaming giant Netease and Chinese search behemoth Baidu.com, Inc. (ADR) (NASDAQ:BIDU) could all be motivated to acquire this fallen icon of social gaming, for many of the same reasons.

Although I don’t recommend investors to simply buy Zynga Inc (NASDAQ:ZNGA) in hopes of a buyout, I believe that it is distinct possibility, considering Zynga’s attractive stable of games, its large customer base of 253 million active monthly users, and its cheap stock price. Usually these market consolidating buyouts occur in the middle of a market swoon such as the current Bernanke-induced meltdown, so investors should keep their eyes peeled regarding any takeover buzz about Zynga.

The article Why Zynga Could Soon Be Acquired originally appeared on Fool.com and is written by Leo Sun.

Leo Sun has no position in any stocks mentioned. The Motley Fool recommends Activision Blizzard. The Motley Fool owns shares of Activision Blizzard and Microsoft. Leo is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.