Zynga shares slide after privileged status with Facebook ends

The corporate logo of Zynga Inc, the social network game development company, is shown at its...

The corporate logo of Zynga Inc, the social network game development company, is shown at its headquarters in San Francisco in this April 26, 2012 file photo. Game provider Zynga Inc slashed its 2012 outlook and quarterly results badly missed Wall Street targets, sending its stock plunging 35 percent and casting a chill over Facebook Inc on the eve of the social network's inaugural results. (REUTERS/Robert Galbraith/Files)

REUTERS

, Last Updated: 6:38 AM ET

Shares of gaming company Zynga Inc fell as much as 10%, a day after the "Farmville" creator reached an agreement with Facebook Inc that reduces its dependence on the social networking giant.

The companies reported in regulatory filings on Thursday that they have reached an agreement to amend a 2010 deal that was widely seen as giving Zynga privileged status on the world's No.1 social network.

Zynga gets a freer hand to operate a standalone gaming website, but gives up its ability to promote its site on Facebook and to draw from the thriving social network of about 1 billion users.

"Although Zynga investors have reacted negatively to Thursday's announcements so far, we view them as a long-term positive for both companies," Wedbush Securities analyst Michael Pachter said in a note to clients.

"Zynga now has an advantage to offer more payment options which could result in additional subscribers who are not Facebook users," he said, maintaining his "outperform" rating and price target of $4 on the stock.

Both internet companies have been trying to reduce their interdependence, with Zynga starting up its own Zynga.com platform, and Facebook wooing other games developers.

In recent quarters, fees from Zynga contributed 15% of Facebook's revenue, while Zynga relies on Facebook for roughly 80% of its revenue.

Francisco-based Zynga's shares were down 7% at $2.44 in morning trading on the New York Stock Exchange on Friday.

Facebook shares were down more than 1% at $26.98.


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