True, but I think in this case the you have to keep your eye on expectations.
A year ago Zynga was making 900 million gross, now it's 205 million.
I'm going to assume that they are looking at their portfolio and realizing they aren't going to go up next quarter, so the real issue is they know they can't continue at the current level, regardless of margins.
If Zynga was a stable company, making similar revenues every quarter, or slightly up/down like Apple, Intel, IBM etc., I think your points are more valid. In fact, I'm pretty sure you could make a reasonable investment in that scenario (or call, if you will).
Since Zynga is not stable, the analysis isn't very helpful, since you already know they are 2 months into the next quarter and probably already burning cash.
Hmm, I guess this is why Buffet doesn't invest in tech so much...visibility seems limited....
A year ago Zynga was making 900 million gross, now it's 205 million.
I'm going to assume that they are looking at their portfolio and realizing they aren't going to go up next quarter, so the real issue is they know they can't continue at the current level, regardless of margins.
If Zynga was a stable company, making similar revenues every quarter, or slightly up/down like Apple, Intel, IBM etc., I think your points are more valid. In fact, I'm pretty sure you could make a reasonable investment in that scenario (or call, if you will).
Since Zynga is not stable, the analysis isn't very helpful, since you already know they are 2 months into the next quarter and probably already burning cash.
Hmm, I guess this is why Buffet doesn't invest in tech so much...visibility seems limited....