The year 2013 was a volatile one for Zynga social gaming as the company went through a significant strategic and management transition and terminated some of its well known games. Revenues and profits continued to slide as the user base shrank. The only silver lining was that the company’s key franchises Farmville, Farmville 2 and Zynga Poker continued to lend support. Going forward, Zynga will primarily focus on mobile gaming and further development of its own gaming platform. Under the new leadership, the company is confident that it can reinvent itself and bounce back by bringing more stability and predictability to its business model. In this analysis, we will discuss key developments for Zynga in 2013 that will essentially shape its strategy for the next year.

Our price estimate for Zynga social gaming stands at $3.33 , implying a discount of about 15% to the market price. Zynga faced a sharp decline in several of its operating metrics in 2013, including the number of monthly active users, the number of daily active users, revenues and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization). This resulted from the continued decline in popularity of its games, strained ties with Facebook and closure of some under-performing titles in the second quarter. For the full year 2013, we expect Zynga’s revenues to be down by roughly 30% as compared to 2012.

As a result of the strategic shift towards introducing fewer but better titles, and to control its operating costs, the company discontinued The Ville, Empires & Allies, Dream Zoo and Zynga City on Tencent in Q2 2013. In mid 2013, it also announced a reduction of its workforce by around 18%, producing a reduction in force of approximately 520 employees for an estimated $70-$80 million in pre-tax savings for the company. Given the sustained period of duress for the social gaming giant, there was a management shake-up as well.

Read more about the future of Zynga social gaming at Nasdaq.