Five Corporations Zynga's IPO Could Impact

Which companies could benefit and which could suffer at the success or failure of Zynga's public debut?

Later this morning, Zynga will begin trading on the NASDAQ Global Select Market under the symbol “ZNGA.” The company's long-awaited IPO was announced at a price between $8.50 and $10, and is now officially priced at $10. Traders who have been eyeing the company's supposed success are eagerly anticipating the moment when they can dive into the firm that's responsible for a number of hit Facebook games. But many have learned that they shouldn't bet the FarmVille on Zynga's success.

Whether today's IPO proves to be a long-term hit or a temporary success story, there are a number of companies that are likely to be impacted by Zynga's public debut. Let's take a look at what those companies are and what we can expect from them – and investors – in the near future.

THQ

At less than $1 a share, THQ (NASDAQ: THQI) has become somewhat of a penny stock. It's almost hard to believe that a company once known for producing the most successful wrestling games in the nation (among other hit franchises) could fall so fast and so painfully in 2011. But that has been the company's fate, most notably after receiving a number of negative reviews for Homefront, a game that had been hyped as an important part of THQ's future. In January, the stock was trading in the $6 range. As of yesterday's close it was at $0.75.

Zynga won't have a direct impact on THQ. But Zynga's success, no matter how short-lived, could indirectly steer investors away from traditional game companies that are struggling to maintain their status within the industry. While Activision (NASDAQ: ATVI) and Take-Two (NASDAQ: TTWO) will continue to thrive on the release of big sequels (Call of Duty this year, Grand Theft Auto next year, etc.), THQ has been struggling all year. Thus, investors may perceive ATVI and TTWO to be the industry stalwarts that they can safely invest in, but may be fearful of touching companies that aren't more successfully banking on the newer formats of gaming, such as social media.

Worst of all, THQ hasn't had much success this year in its core area of development – console games. This is going to make it very difficult for traders to believe that THQ has a future that is worth investing in.

Electronic Arts

Never mind Zynga's IPO – the company's mere existence has already had a hugely positive impact on Electronic Arts (NASDAQ: ERTS). If it weren't for Zynga, EA might not have realized the potential for casual and social gaming. While the company has produced a few hits in this realm, EA has traditionally stuck to the console market, producing hits like Madden, FIFA, Need for Speed, and most recently Battlefield 3. But after Zynga started to gain attention on Facebook, EA began to take a second look at casual gaming. Earlier this year, the company acquired PopCap Games and became the number two player in social gaming. The only company that can currently beat EA is Zynga.

In September, Reuters reported that EA hopes to make $3 billion from digital game sales in the next few years. “Digital” games include more than social; it encompasses every paid download EA can sell. But $3 billion is a huge goal. Without PopCap, EA's expectations would likely be lower.

Zynga's success has inspired EA to work harder, make smarter acquisitions, and strive to take control of a market that is currently being ignored by other major players within the game industry. If Zynga tanks, EA will be there to take its place; if Zynga thrives, it will only add to EA's urge to fight.

Majesco

The Little Game Company That Could or the Little Game Company That Shouldn't? Majesco's days of trading at more than $270 a share are long gone. But the company has maintained a degree of success (in sales, not so much with investors) by bringing casual and quirky games like Cooking Mama to the United States.

This year, Majesco has seen its shares rise from a weak $0.79 (not that far from where THQ is trading right now) on January 3 to an impressive $4.39 on June 13. The stock declined in the following months and closed yesterday at $2.81.

Zynga's IPO won't have an immediate impact on Majesco. But if Zynga opens strong and maintains its strength, Majesco could find itself in the same situation that THQ faces. While Majesco has had some niche success stories in the console market, the company does not appear to have a social gaming strategy in place.

It has, however, published a few iOS games, which is somewhat of a win-lose market for all but the luckiest developers. On one hand, the iOS market (where you pay one fee now and play forever) is much more viable than the social gaming market (where you can play for free but must buy items with real cash to improve the experience). iOS games are also fairly cheap to develop. However, the App Store is overcrowded with competition, making it next to impossible to stand out. Thus, it could be easier for Majesco to develop a hit social game instead.

Glu Mobile

With games like Contract Killer: Zombies, Bug Village, and Big Time Gangsta, Glu Mobile (NASDAQ: GLUU) won't win any awards for coming up with original titles. But the company has been pretty darn successful in the realm of mobile gaming.

While Glu Mobile develops plenty of silly, kid-friendly games (Boo Town, anyone?), the company's specialty is to make console-style games for iOS and Android. One look at the graphics and you'll see why the company is gaining traction.

Considering the fact that most of Glu's games were “inspired” (read: copycats) by other console or social games (ex: Toy Village looks just like a Zynga game), Glu's future may be tied to consumers' overall taste for a particular genre. If Zynga flourishes, Glu could feasibly release an additional slate of FarmVille clones. But if Zynga dies off, Glu would be left with one less company to copy, and one less market to fulfill.

Perhaps it's time for Glu Mobile to develop some original content?

Clearwire

Clearwire (NASDAQ: CLWR) may not be a game company, but Zynga could still affect its future. As a broadband partner with Sprint (NYSE: S), Comcast (NASDAQ: CMCSA), Time Warner Cable (NYSE: TWC) and Bright House, Clearwire is a prominent company in mobile broadband. The company also offers its own broadband service, CLEAR.

Whereas most games outside the social market can be played offline in some capacity, Zynga's games rely heavily on a consistent Internet connection. As consumers shift away from disc- and download-based mediums and move toward broadband streaming, Clearwire will have additional opportunities to cash in. Likewise, if more players shifted to Zynga's products or other online-only games, we would need to be connected at all times to play online. Since Clearwire has a mobile Internet option, this could be a crucial factor in the not-to-distant future.

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