March 02, 2012 at 14:27 PM EST
Zynga: New Platform Positive Change to Biz Model, Says Piper
Shares of online games purveyor Zynga (ZNGA) are up 28 cents, almost 2%, at $14.75 after the company yesterday unveiled what it calls “Zynga Platform,” a way for other companies to develop games featured on Zynga.com, in a move to broaden away from being tied to Facebook for its success. In a note to clients [...]

Shares of online games purveyor Zynga (ZNGA) are up 28 cents, almost 2%, at $14.75 after the company yesterday unveiled what it calls “Zynga Platform,” a way for other companies to develop games featured on Zynga.com, in a move to broaden away from being tied to Facebook for its success.

In a note to clients today, Piper Jaffray’s Michael Olson writes that the new offering may add to Zynga’s earnings following the June quarter of this year.

Olson, who has an Overweight rating on Zynga shares and a $16.50 price target, writes that the move could “alter the Zynga growth story,” he writes. For one thing, while Zynga.com “will rely on Facebook Connect,” nevertheless, “Zynga.com resides outside of the Facebook platform and, therefore, represents a new chapter in the two companies’ partnership.”

More important, it makes Zynga a kind of “cloud computing” infrastructure for gaming, argues Olson:

Zynga.com represents a reclassification of Zynga’s business modelbusiness model by adding other small-to-mid sized developers as customers. We believe the Zynga.com service is analogous to Amazon Web Services and Fulfillment by Amazon as it opens Zynga’s existing technology infrastructure to third parties. This new model is also consistent with Zynga’s core competency of analytics and cross promotion.

Fin

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