News Column

Zynga: Pincus Out, Microsoft Exec In

July 2, 2013

Troy Wolverton

Zynga's move Monday to name a new CEO -- video game industry veteran Don Mattrick -- cheered investors but left analysts feeling much more ambivalent.

Mattrick comes to the struggling social game company after successfully leading the transformation of Microsoft's video game division from a money loser to an industry leader. But industry analysts questioned whether Mattrick, with little experience in social games, was a good fit for Zynga. And they wondered how much leeway he will get from founder Mark Pincus, who will retain control of Zynga even after dropping his CEO title.

"He's a big name," said James Lin, a longtime game industry

consultant. "I'm not sure if he's the right fit."

Investors were much more enthusiastic. Before the announcement, a report by All Things D that Zynga might bring Mattrick on board sent Zynga shares soaring; they closed regular trading up 29 cents, or nearly 10 percent, to $3.07. After the company confirmed the hire, investors sent the stock up another 15 cents in after-hours trading.

Mattrick comes to Zynga at a time when the company's core social gaming business, which operates "FarmVille" and other Facebook games, has declined and as the company's bets on mobile games and real-money casino gaming have yet to pay off. Once the dominant social gaming company, Zynga has

struggled over the past 18 months with falling sales, disappointing earnings, two mass layoffs, the departure of numerous top executives and a plunging stock price.

While Mattrick has been in the game industry for 30 years, his focus has been on the traditional console business. Before heading Microsoft's interactive entertainment business, which oversees the Xbox, he worked for 15 years as an executive at Electronic Arts (ERTS), ending his tenure there as its president.

Mattrick has little experience in either Zynga's core business of social gaming or its nascent ones in the mobile and casino markets, analysts noted.

"It's not entirely clear where Don has a real competitive edge," said Adam Krejcik, a financial analyst at Eilers Research. "It's understood that he's a good manager, but it's not like they went and hired someone with specific mobile experience or real-money gaming" experience.

And it's unclear, analysts said, how much freedom Mattrick will have to redirect the company. Pincus, who controls about 60 percent of the voting power over Zynga's shares, will remain chairman and chief product officer, and will serve with Mattrick on an "executive committee" that will oversee Zynga's day-to-day operations.

Mattrick is only the latest industry big-shot that Zynga has hired. Many earlier hires have already left the company in a wave of executive defections over the last year. Among the departed were John Schappert, who joined Zynga in 2011 as its chief operating officer after serving, like Mattrick, as an executive at Microsoft and EA. Schappert left after little more than a year at Zynga.

"The question for me ... is: Will Mattrick have the freedom to do what he thinks needs to be done?" said Joe Spiegel, an industry analyst with Dalek Capital.

In a blog post, Pincus said he recruited Mattrick and expressed confidence that he was the best person to lead Zynga.

Mattrick is "one of the top executives in the overall entertainment business," Pincus wrote. "He's a great coach who has inspired people to do their best work and build strong, productive teams."

Despite their reservations about the move and what it will mean for the company, analysts generally applauded it. Mattrick's a very capable executive who has vast experience in the game business, said Michael Pachter, a financial analyst who covers Zynga for Wedbush Securities.

"I think probably nobody's a good fit" for Zynga," Pachter said. "He's as good as you're going to get."

Contact Troy Wolverton at 408-840-4285. Follow him at Twitter.com/troywolv.

Zynga's New CEO

Name: Don Mattrick

Age: 49

Birthplace: Vancouver, British Columbia, Canada

Previous jobs: President, Interactive Entertainment Business, Microsoft; president of Worldwide Studios, Electronic Arts

Family: Married, two children

Of note: Founded a gaming company -- Distinctive Software -- at age 17. Later sold it to EA.

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