Zynga Inc. (NASDAQ: ZNGA) is a company with a new CEO, but without a future. Everyone agrees with that, except Zynga. That leaves with game company’s board with the dilemma, which is, if the public corporation cannot survive on its own, where can it survive? Like with any battered company, the answer is that there could be several buyers. In Zynga’s case it is old world video game company Electronic Arts Inc. (NASDAQ: EA). They belong together.

The result of Zynga’s second quarter have been published almost everywhere. The first reaction many on Wall Street had was that the tenure of new CEO Don Mattrick, who was hired from Microsoft Corp. (NASDAQ: MSFT), cannot turn the company around because its fortunes are deteriorating too quickly, which its numbers prove:

• Q2 2013 revenue of $231 million, down 31% year-over-year, and bookings of $188 million, down 38% year-over-year
• Q2 2013 net loss of $16 million and adjusted EBITDA of $8 million
• Q2 2013 GAAP EPS of ($0.02) and non-GAAP EPS of ($0.01)
• Implemented significant cost reductions resulting in a $25 million Q2 2013 restructuring charge with an expected annualized pre-tax cash savings ranging from $70 million – $80 million

And, worst of all:

• Daily active users (DAUs) decreased from 72 million in the second quarter of 2012 to 39 million in the second quarter of 2013, down 45% year-over-year. On a consecutive quarter basis, DAUs were down 24% from 52 million in the first quarter of 2013. Web DAUs and Mobile DAUs were 23 million and 16 million in the second quarter of 2013, respectively.
• Monthly active users (MAUs) decreased from 306 million in the second quarter of 2012 to 187 million in the second quarter of 2013, down 39% year-over-year. On a consecutive quarter basis, MAUs were down 26% from 253 million in the first quarter of 2013. Web MAUs and Mobile MAUs were 129 million and 57 million in the second quarter of 2013, respectively.

Every metric is falling apart fast

EA’s major problem is it is stuck in the old video game world, which relies on consoles and handheld game devices. Its success in moving to the smartphone and the social network has been limited. EA’s revenue and net income were virtually flat in the most recent quarter. Revenue was down a tiny tick to $949 million and net was up a tiny tick to $220 million.

When Electronic Arts fired CEO John Riccitiello earlier this year, Reuters made this point:

EA and other traditional video game companies have been trying to adjust to a changing world where consumers are turning to mobile devices and cheap or free online games instead of buying expensive packaged titles.

Zynga is in trouble, but so is EA, There is a case to be made that one plus one equals more than two, if a buyout helps EA move more quickly from the old world to the new. EA’s market cap is $8 billion, about three times that of Zynga. A long shot, yes. But that is what it will take to repair either or both companies.

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