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Can Microsoft's Xbox head save Zynga?

Zynga brings in head of Microsoft's Xbox business to replace founder Mark Pincus. Smart move?

By Reuters / July 2, 2013

Zynga's CEO, Mark Pincus (left), is stepping down to be replaced by Don Mattrick, the head of Microsoft's Xbox business.

GlobeNewswire/AP

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Zynga Inc's decision to bring in the head of Microsoft Corp's Xbox business to replace founder Mark Pincus is a bold stroke that was hailed on Wall Street, but it still leaves questions as to who is ultimately in charge at the troubled game-maker.

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Don Mattrick was personally recruited by Pincus. But Pincus holds on to 61 percent of the voting rights due to a two-tiered stock structure and will remain Zynga's chairman and its chief product officer.

Mattrick, who is credited with building Microsoft's Xbox business into a gaming powerhouse, hesitated before agreeing to take the job, people with knowledge of the events said.

His doubts finally faded during a grueling bike ride through the Santa Cruz mountains one recent weekend, when Pincus opened up to Mattrick about how he had come to terms emotionally with relinquishing the reins at the company he founded in 2007.

While Wall Street cheered Mattrick's appointment, sending Zynga's shares up more than 10 percent and another 3 percent after hours, some analysts questioned whether the shake-up would change Zynga's performance in a significant way.

"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?"

Mattrick will hold the final say in day-to-day matters, including green-lighting new games, people familiar with the situation said.

Zynga's business model, which relied heavily on selling virtual goods to gamers on Facebook Inc's platform, began to disintegrate in mid-2012 as users tired of Facebook games and shifted to playing on mobile devices.

Pincus, who has long wanted to turn the firm he named after his pet bulldog into a large Internet company, privately acknowledged in recent months that he has lacked the ability to manage such a company, said a person familiar with his thinking.

This spring, Bing Gordon, the Kleiner Perkins Caufield and Byers investor and an active member of its board, floated the idea of recruiting Mattrick, whom Gordon had known from their years together at game publisher Electronic Arts.

Pincus quickly agreed to help woo Mattrick, and the two had a series of meetings in California and Seattle.

In a statement issued Monday, Mattrick emphasized Pincus's role as a visionary and described their working relationship as that of partners.

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