Interop Notes From Citrix to Zynga

LAS VEGAS -- The stock market tried to cast a downer mood on the last day of the Interop enterprise technology conference here. We reported yesterday on Cisco's lackluster earnings call, which pressured networking stocks this morning. But with so much happening in networking technology, don't think that one Cisco Systems Inc. (Nasdaq: CSCO) call will hold the entire sector down for long.

Some of the world's most powerful tech companies gathered here to talk about important trends in networking and enterprise technology. From what I gathered from meeting with dozens of technology analysts and professionals, the big trends are here to stay. Cloud computing, mobile communications, and social networking are likely to last through the rest of the decade (at least).

How does an investor make sense of all this? It is certainly tricky. Dozens of companies are attacking these trends in numerous markets. The big trends help some people and hurt others. Some companies are better at exploiting the trends than others. But let me recount a few items I picked up from my discussions.

Zynga's got a gaming cloud
Let's combine the concepts of cloud computing and social gaming. Sounds compelling, doesn't it? Zynga Inc. (Nasdaq: ZNGA), a recent IPO, has launched its own platform for helping other game developers launch their businesses -- cloud computing for game developers.

What's this mean? Traditionally, Zynga has marketed to users via Facebook (Nasdaq: FB) and has used Amazon.com Inc. (Nasdaq: AMZN) cloud services to host its own games. But as the company's immense audience for its casual games has grown, Zynga has decided to build out its own platform for launching and hosting games, utilizing technology it had developed with its own growth experience.

What's the advantage of this? Chief technology officer Allan Leinwand said it could allow Zynga to build a new business in hosting social and online games. The Zynga.com game site is getting "only" about 350,000 daily active users, and this model is relatively new and young compared with the Facebook-based business, but he says nearly all the growth has been organic.

This could give Zynga a long-term upside. Many folks are concerned that its growth through Facebook is slowing. "We want to help third-party developers because surfacing games is hard," said Leinwand.

The stock is interesting to watch. Zynga booked an operating loss of about $400 million in 2011 as it prepared for its initial public offering by adding employees and building infrastructure. But its results included more than $700 million of spending on research and development -- a boost of nearly $600 million over 2010. After raising $1 billion from its IPO, Zynga is in no danger of running out of cash, and it has made substantial technology investments. The stock was recently hammered down to $7 and is approaching bargain-basement territory. This is a company that doubled in size in the last 12 months, and it's now trading at a forward P/E of about 20.

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