Zynga makes moves to stay in the game

Founder Mark Pincus' CEO role is going to veteran industry exec Don Mattrick. That doesn't mean investors should start playing, though.

By Jonathan Berr Jul 3, 2013 10:44AM
Despite many reports of Zynga's (ZNGA)  demise, the struggling company is still making moves.

Shares of the corporate parent of Words With Friends and Farmville have soared as investors bet that new CEO Don Mattrick can turn around the struggling social gaming company. His predecessor Mark Pincus, who’s also Zynga's founder, is staying on in a diminished role.
Mattrick, the former head of Microsoft's (MSFT) Interactive Entertainment business, has an impressive gaming pedigree. While at the software giant, which is the corporate parent of MSN Money's Killer Companies, his responsibilities included the Xbox gaming system, which as of April had topped the U.S. market for 28 straight months. He also worked at Electronic Arts (EA), the second-largest video-game maker.

Among the biggest challenges facing Mattrick is getting gamers excited about Zynga again. The company, though, has turned off players by introducing too many titles that were derivative of its existing games. Even worse, according to Forbes contributor Nathan Vardi, was its notoriously poor customer service, which left many players feeling "ignored or mistreated."

Handout photo from GlobeNewswire showing Zynga's new CEO Don Mattrick, right, with Zynga's founding CEO Mark Pincus (© AP Photo/GlobeNewswire)Pincus (pictured on left), who was instrumental in hiring Mattrick (right), will become Zynga's chief product officer and will retain majority voting power over the board, if he chooses to exercise it.

Under Pincus' leadership, Zynga has floundered after a hot start. The company has tried to lessen its dependence on Facebook by building up its own website and through acquisitions such as last year's $210 million deal to buy OMGPOP, the publisher of Draw Something. Neither strategy, though, has worked out.    

Zynga hasn't been able to attract enough gamers using mobile devices, and it wound up shutting down OMGPOP a year after acquiring it. Last month, the company announced plans to fire one-fifth of its workforce and close some offices in a cost-cutting move.

But investors who may be tempted to buy Zynga on the new optimism should wait. The enthusiasm for Mattrick will die down, and the stock, which is trading above its average 52-week price target, may pull back. Zynga could benefit from the growth in online gaming, but when that might happen is anybody's guess.

Analysts expect Zynga to lose money for at least the next two quarters and for the calendar year, with revenue plunging by double digits for a while. And any inkling that Mattrick is stumbling at all will pummel the stock. So, the risks of buying now outweigh any benefits.

Jonathan Berr does not own shares of the listed stock. Follow him on Twitter @jdberr.


3Comments
Jul 3, 2013 12:29PM
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does that mean we get zynga on xbox one now ;-)
Jul 3, 2013 12:42PM
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Meanwhile I am making money with ZNGA....and will just wait and see how the new leader does. Thanks for your advice...LOL...
Jul 3, 2013 1:07PM
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tHESE POOR SOULS AROUND HERE ARE just lost without their Kramer or Antman Fixes...

Nobody to chide, yell at, or call a moron...

After coming back from the Casino and a stop at a local Vet's club, I ended up watching Cramer on TV in the middle of the night, had trouble following what he was saying; Lots of Gobbly **** or maybe I was just too tired...So I can skip him today.

They are all probably headed out to the Hamptons to celebrate the 4th..

And the Market closes in couple minutes anyway, ahh a break for a day or so.

 

Yes, ITS all about Gaming, Investing in the Markets,(even in Casinos) Getting Black Jacks on the 21 tables. And Trips on 3-Card and Mississippi Stud...Yup what a roll..

Playing Poker and other Casino games on-line and I guess other Video games, I don't play.

Last night was a great night, and I brought home a lot of free food and some xtra bucks for Miss Lilly's stash or kitty...She bankrolled me last night, I paid her back and 70% interest on top..

She was happy this morning....kept 30% cut for myself..

Have a nice 4th to all.....Nap time,Ciao.

 

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