(REUTERS) NEW YORK, Nov 30 - Facebook games developer Zynga Inc is seeking a lower-than-expected $10 billion valuation for its initial public offering, which is to be priced on December 15, two people close to the process said on Wednesday.

In one of the most highly anticipated deals of the year, Zynga plans to file terms with regulators on Friday for an IPO that would generate around $900 million in proceeds, based on an indicative range of $8 to $10 per share and an initial float of 10 percent, according to the sources.

Zynga spokesman Adam Isserlis declined to comment. In a filing two weeks ago, the company said a third-party analysis had valued Zynga at $14.05 billion.

But that figure would have been too ambitious in these rocky market conditions, analysts said. Video game heavyweight Electronic Arts Inc has a market value of $7.69 billion while Activision Blizzard Inc has a market cap of $14.21 billion.

I think they must have realized that getting $14 billion or higher would be a tough thing in this market. We were wondering how they would pull that off, said Sterne Agee analyst Arvind Bhatia.

Zynga rose to prominence on viral games such as Farmville, which is still among one of the most popular games on the Facebook social network. While its games are free, Zynga makes money from selling virtual items such as tractors and weapons that people use in its game worlds.

The company is profitable, but its cash flow growth slowed in the September quarter as expenses increased due to investments in new games. Nonetheless, Zynga is on track to become one of the fastest Silicon Valley companies to achieve more than $1 billion a year in revenue.

Wedbush Securities analyst Michael Pachter said Zynga could command a higher valuation if it waited until 2012 to go public.

They should file their December quarter financials first. People will pay for growth, he said, adding that recently released games such as CastleVille are doing well and that revenue has not been recorded yet by the company.

The social gaming leader follows in the footsteps of Internet companies Groupon Inc and Angie's List in testing public markets. Facebook itself is gearing up to go public next year.

Nexon, another game publisher that makes free games and sells virtual items, is planning to list its shares on the Tokyo Stock Exchange on Dec 14 and raise an amount that equals $1.3 billion in U.S. dollars.

Some analysts have expressed concern over Zynga's heavy reliance on Facebook as the main platform for its games. Facebook takes a 30 percent cut of any revenue earned on its social network, the world's largest.

ROADSHOW STARTS ON MONDAY

Zynga Chief Executive Mark Pincus will lead presentations to potential investors starting next week, along with Chief Operating Officer John Schappert and Chief Financial Officer David Wehner, Reuters reported earlier this week.

Another source familiar with the matter said Pincus will not sell shares in the IPO, and neither will Kleiner Perkins Caufield & Byers, one of Zynga's main venture capital backers.

Morgan Stanley and Goldman Sachs are lead bookrunners on the deal, with Bank of America Merrill Lynch, Barclays Capital, JP Morgan and Allen & Company also named in the syndicate.

Underwriting committees at the banks involved are finalizing their participation in the offer.

The $900 million figure is shy of the $1 billion Zynga had registered for on July 1, but underwriters could ultimately increase the size of the deal based on demand, sources said.

The time table suggests the banks will opt for a standard nine-day roadshow, paving the way for a Nasdaq debut on December 16.

Zynga's games have 54 million daily active users and 227 million monthly active users in 175 countries, mostly via games on Facebook.

Founded in 2007, the company increased its annual revenue from $19.4 million in 2008 to $597.5 million in 2010, and generated revenue of $828.9 million in the nine months to September 30. Over the same period, net income was $30.7 million and earnings before interest, taxes, depreciation and amortization (EBITDA) were $235.5 million.

(Reporting by IFR's Anthony Hughes and Robert Sherwood; Additional reporting and writing by Liana B. Baker; Editing by Steve Orlofsky)

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