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Microsoft Corporation (MSFT) Pretends to Be Sad

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Zynga announced today that Don Mattrick would be its new CEO, effective July 8. This is a great opportunity for Don, and I wish him success.”
— Steve Ballmer, in an email to employees

After Zynga Inc (NASDAQ:ZNGA) announced that it was getting a new CEO by taking Don Mattrick from Microsoft Corporation (NASDAQ:MSFT)‘s gaming business yesterday, I guess Microsoft had to put on a sad face. “Oh no,” it cried. “The guy who helped us launch the Xbox One is going to a sort-of rival.”

Microsoft Corporation (MSFT)

What no one brings up is that there are two scenarios that Mattrick could have left under. Either he knew he was leaving when the new Xbox was rolled out, or he thought he was staying. If he knew, then his lackluster attitude toward the new product makes a certain kind of sense, but it also makes him a liability. From the outside looking in, the options for Mattrick weren’t great.

Moving along
Mattrick’s launch of the Xbox One was greeted with limited enthusiasm. Gamers were happy to see a new system, but many questioned the requirement for an Internet connection, the rigid new digital rights management rules, and the $499 price tag. Then, during June’s E3 video game conference, Sony Corporation (ADR) (NYSE:SNE) unveiled its PlayStation 4, and the world went mad.

The revolution that the Sony announcement sparked was based on… no evolution. Used games will work like they currently do. Internet requirements, the same. As an added insult, the PS4 will cost $100 less than the Xbox One. By not changing anything, Sony Corporation (ADR) (NYSE:SNE) put Microsoft Corporation (NASDAQ:MSFT) on the defensive.

Mattrick was the face of the Xbox while the controversy swirled, and he didn’t make all the right moves. For instance, when asked what gamers without reliable Internet connections should do, since the Xbox One needed gamers to check-in online once every 24 hours, Mattrick said, “Fortunately we have a product for people who aren’t able to get some form of connectivity. It’s called the Xbox 360.” I don’t want to vilify Mattrick, but “keep what you’ve got and be happy” was the wrong answer. It seems that Microsoft Corporation (NASDAQ:MSFT) may have agreed, given that it pulled a dramatic 180 soon after E3.

The Zynga Inc (NASDAQ:ZNGA) position comes with a significant title, as Mattrick will be CEO of the whole company instead of just one portion, like he was at Microsoft Corporation (NASDAQ:MSFT). That increased responsibility doesn’t actually come with a bigger job. Zynga pulled in $263.6 million last quarter, while the entertainment and devices division that Mattrick is leaving generated $2.5 billion.

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