(Adds analyst comment)
By Gerry Shih and Malathi Nayak
SAN FRANCISCO, July 1 Games publisher Zynga Inc
has replaced chief executive Mark Pincus with Don
Mattrick, the Microsoft Corp executive who headed the
critical Xbox business, Zynga announced on Monday.
The news, reported first by AllThingsD, sent Zynga shares up
more than 11 percent earlier in the day. The shares rose a
further 3 percent to $3.17 when Zynga confirmed the appointment
after the bell.
Pincus, 47, who controls a 61 percent voting stake in the
gaming company he founded in 2007, will remain as the company's
chairman and chief product officer after personally helping to
recruit Mattrick from Microsoft.
"Don is unique in the game business," Pincus said in a
statement. "He can execute in multiple domains - hardware,
software and network, and he's been the person responsible for
game franchises like 'Need for Speed,' 'FIFA' and 'The Sims.'"
Zynga's business model, which relied heavily on selling
virtual goods to gamers on Facebook Inc's platform, began
to disintegrate a year ago as users tired of Facebook games and
shifted to playing on mobile devices.
The company's shares have hovered at just 25 percent of its
$10 initial offering price in December 2011 as Pincus has
struggled to turn around the company named after his pet
Mattrick's new role leading a game maker that publishes
social media-based titles and smartphone games will be a marked
departure from the world of big-budget, packaged console games
embodied by the Xbox and Electronic Arts Inc, the game
publishing firm where he had worked for 15 years.
In a statement, Mattrick emphasized that Pincus willingly
recruited him and described their working relationship as that
"I joined Zynga because I believe that Mark's pioneering
vision and mission to connect the world through games is just
getting started," Mattrick said. "Zynga is a great business that
has yet to realize its full potential. I'm proud to partner with
Mark to deliver high-quality, fun, social games wherever people
want to play."
Although Wall Street embraced Mattrick's appointment, many
analysts said questions remained about Zynga's ability to
produce hit games that could prop up its shrinking revenues.
"Bringing in someone who has worked at a larger company to
assist in management duties I think is a relief right now," said
Richard Greenfield, an analyst at BTIG Research.
"But Pincus is still the chief product officer. So the
question is, what's actually changed day to day in terms of
making hit games?"
XBOX TURN AROUND
Mattrick joined Microsoft in 2007 after spending 15 years at
EA, where he worked under Bing Gordon, a well-known gaming
industry executive who went on to join venture capital firm
Kleiner Perkins Caufield & Byers.
Pincus and Gordon, who sits on Zynga's board, led the effort
beginning this spring to recruit Mattrick, who had expressed an
interest in leaving Microsoft to lead a company, according to
people familiar with the situation.
Pincus, who joins Groupon's Andrew Mason among high-profile
tech entrepreneurs who have relinquished their jobs as chief
executives, publicly backed Mattrick's appointment.
"I've always said to Bing and our Board that, if I could
find someone who could do a better job as our CEO, I'd do all I
could to recruit and bring that person in," Pincus said. "I'm
confident that Don is that leader."
At Microsoft, Mattrick helped turn the Xbox business into a
profitable venture after years of losses, eventually propelling
it into the No.1 selling console in the United States.
Mattrick's departure comes just as Microsoft gears up to
launch the third version of its console, called the Xbox One.
Unveiled in May and scheduled to hit stores later this year, the
machine has already stirred controversy.
Gamers attacked the high price, Microsoft's plan to require
an Internet connection at least once a day and attempts to limit
the sharing of used games. Last month, Microsoft reversed its
position on the Internet connection and said it would allow game
Mattrick has been rumored to be departing for months. After
EA's CEO stepped down in March, industry sources speculated he
was in the running to lead the top games publisher, where he
previously held numerous leadership roles.
(Reporting by Malathi Nayak, Gerry Shih and Alexei Oreskovic in
San Francisco and Bill Rigby in Seattle. Editing by Andre