* Mattrick turned around Microsoft's Xbox business
* Zynga business model flailing due to rise of mobile games
* Founder Pincus to remain chairman, chief product officer
* Zynga shares shoot up on news of Mattrick's appointment
* Mattrick departure comes amid broad reshaping at Microsoft
By Gerry Shih and Malathi Nayak
SAN FRANCISCO, July 1 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.
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
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
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.
"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.
Pincus praised his successor without reservation.
"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 in a
statement. "I'm confident that Don is that leader."
STELLAR TRACK RECORD
News of Mattrick's appointment, 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.
Over the past year, the company's value has fallen to just
25 percent of its $10 initial offering price in December 2011 as
Pincus struggled keep his company out of free-fall despite
multiple waves of layoffs.
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
where he spent most of his career.
Mattrick headed successful franchises like "FIFA" in his 15
years at EA, where he first worked under Gordon before later
supervising Gordon. He joined Microsoft in 2007.
Once there, 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 was known to be very hard on his employees but
still well-liked within the gaming division at Microsoft, said
one former Xbox employee. Still, his power did not extend much
beyond his own unit in a company that is still essentially
driven by its two main businesses, Windows and Office, and that
may have contributed to his desire to leave, observers said.
"He had a good sense of humor, a pretty compelling vision of
gaming, and a hard-nosed business sense," said one former Xbox
employee, who asked not to be named.
Mattrick had been rumored to be considering leaving 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.
Mattrick's departure takes place against the backdrop of a
broader re-shaping of Microsoft.
Ballmer is expected to announce a broad restructuring in the
next few weeks that moves the company closer to his previously
stated vision of becoming a devices and services company - much
like Apple - rather than primarily a software company. There has
been talk that Ballmer will create a 'devices' unit, moving the
Xbox, Surface tablets and possibly the phone unit into one