July 1 (Bloomberg) -- Zynga Inc. is hiring Don Mattrick, the former head of Microsoft Corp.’s entertainment division, as its new chief executive officer, seeking to reignite growth at the game developer.
Mattrick will succeed Mark Pincus, who will remain chairman of the board and chief product officer, Zynga said in a statement today. Mattrick, who will also join the board, starts July 8, the company said.
Mattrick faces the challenge of turning around Zynga, which is suffering amid rising competition from upstarts such as King.com as well as a shift toward gaming on handheld devices. His experience in the industry, which includes stints at Microsoft and Electronic Arts Inc., may help San Francisco-based Zynga find new lines of revenue outside of Facebook Inc., where it is losing users, according to Michael Hickey, an analyst at National Alliance Capital Markets.
“It does potentially demonstrate that he believes they have a compelling growth profile,” Denver-based Hickey said in an interview. “He also adds credibility to an executive team that has been significantly compromised after their core Facebook business has deteriorated.”
Pincus will take a diminished role at the company he founded, a sign that his hard-charging management style and negotiating prowess -- once described by Google Inc. Chairman Eric Schmidt as “fearsome” -- may have clashed with the needs of a large, publicly traded business.
Shares of Zynga jumped as much as 13 percent, the biggest gain since April 3, after technology blog AllThingsD reported earlier today that Mattrick could take over the game developer. Zynga rose 10 percent to $3.07 at the close in New York. The stock is down 69 percent since debuting in December 2011.
Mattrick resigned from Microsoft at the end of last week, said a person with knowledge of the matter.
Bing Gordon, the venture capitalist who led Kleiner Perkins Caufield & Byers’ 2008 investment in Zynga and serves as a close adviser to Pincus, was instrumental in Mattrick’s hiring, said another person familiar with the matter. The two worked together as executives at Electronic Arts.
Pincus and Mattrick first discussed opportunities at Zynga in March, when the two road-bike enthusiasts began going on rides together, said a person familiar with the talks.
Zynga’s board of directors voted unanimously to appoint Mattrick as CEO, the company said. No formal search was conducted, and Mattrick was the only candidate to replace Pincus, said another person with knowledge of the matter.
At Zynga, Mattrick will report to a board that’s under close control by Pincus. After founding the company in 2007, Pincus put in place a governance structure granting him de facto control over board voting. Pincus will retain majority voting power over the board after Mattrick’s hiring, said a person familiar with the plan.
Pincus previously stepped down from the CEO job at Support.com, a company he founded in 1997. Pincus left the role amid tension with the board, two people with knowledge of the matter said in 2011. When the Support.com board brought in former Hewlett-Packard Co. executive Radha Basu as the new CEO, Pincus, then chairman, asked engineers to work on weekends so he could give them projects not authorized by Basu, said one of the people, who asked not to be identified because the information is private.
“I think Pincus needs somebody professional running his company, so anybody who has more management experience than Pincus is a good choice,” said Michael Pachter, an analyst at Wedbush Securities Inc. who rates Zynga shares outperform.
Pincus joins other technology entrepreneurs who have lost or ceded top jobs within a few years of taking a company public. Earlier this year, Groupon Inc.’s board of directors fired Andrew Mason, the co-founder and former CEO, as growth slowed.
In a memo to Zynga employees today, Mattrick said he plans to work closely with Pincus to restart growth.
“Zynga is a great business that has yet to realize its full potential,” Mattrick said in the memo, which was posted on Zynga’s blog. “I’m really proud to partner with a product focused founder like Mark and work with the executive team to grow the DNA of the company and lead this transition.”
Zynga said last month it will cut 520 jobs, or 18 percent of its staff, and close some offices amid disappointing results.
Mattrick was probably drawn to Zynga for the opportunity to make the company competitive in the game industry again, said Sean McGowan, an analyst at Needham & Co.
“What’s attractive to Don is that’s he’s able to turn things around,” McGowan said. “If he pulls this off, it could be a massive boost.”
Microsoft CEO Steve Ballmer had been planning a reorganization of the software maker aimed at reducing the number of business units and putting more focus on devices and services, people familiar with the matter said last month. He was planning to give more responsibility to Mattrick, the people said at the time.
Ballmer promoted Mattrick to president of the interactive-entertainment business in October 2010. The executive, who joined Microsoft in 2007, has been leading the effort to introduce the next-generation Xbox One home-entertainment and gaming console that will compete with Sony Corp.’s new PlayStation 4 device.
“This is a great opportunity for Don, and I wish him success,” Ballmer wrote in a memo sent to Microsoft employees and posted on its website today.
Mattrick reversed course on a policy last month for Microsoft’s new console that would have required users to connect to the Web at least once every 24 hours to keep playing a game, and the company lifted restrictions on reselling, trading and lending used game titles.
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