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Here’s What You Should Know About Zynga Inc (ZNGA) Now

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U.S. stocks traded in a narrow range today, ending the day essentially unchanged as the S&P 500 and the narrower, price-weighted Dow Jones Industrial Average fell 0.05% and 0.28%, respectively.

Consistent with that small loss, the CBOE Volatility Index (VIX), Wall Street’s “fear index,” rose just 0.4% to close at 16.44. (The VIX is calculated from S&P 500 option prices and reflects investor expectations for stock market volatility over the coming 30 days.)


Zynga Inc (NASDAQ:ZNGA): Don’t play this game

The shares of social games developer Zynga Inc (NASDAQ:ZNGA) are up by nearly a fifth in two days (see graph) on news that founder Mark Pincus is stepping down as CEO to make way for Don Mattrick, who had been the president of Microsoft Corporation (NASDAQ:MSFT)‘s Interactive Entertainment Division. Is that “pop” justified?

ZNGA Chart

ZNGA data by YCharts.

The more I learn about Mattrick, the more I think this hire is a terrific coup for Zynga Inc (NASDAQ:ZNGA). For one thing, one would be hard-pressed to find someone with deeper knowledge and experience of the gaming industry. At 17, Mattrick founded games company Distinctive Software, which he sold to Electronic Arts (EA) by the time he was 27. That’s where he went on to spend 15 years of his career. At EA, he built two fabulous franchises, the Sims and FIFA Soccer. His record developing the Xbox franchise during the six years he spent at Microsoft Corporation (NASDAQ:MSFT) is, by all accounts, excellent.

Furthermore, he is certainly being incentivized in a manner that aligns his interests with (suffering) shareholders: The Wall Street Journal reports that roughly 95% of his compensation will be in stock.

All good things, but it might not be enough. As former EA Kristian Segestrale told the Financial Times: “He’s the best Zynga Inc (NASDAQ:ZNGA) could have done — it’s a very courageous move but both for him and for Zynga it will be incredibly challenging.” Even ignoring the challenge of a successful transition to mobile devices, the casual gaming market is extraordinarily volatile. According to online tracker AppData, just yesterday, Zynga Inc (NASDAQ:ZNGA) lost its crown as the top games provider on Facebook to, a position it had held for five years.

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