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The Walt Disney Company (DIS) Shows What Management Stability Means, Can Zynga Inc (ZNGA) Follow Suit?

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It could be a game changer. Zynga Inc (NASDAQ:ZNGA) has a new chief at the helm and it could lead to a paradigm shift in the gaming market. Zynga Inc (NASDAQ:ZNGA) snatched gaming veteran Don Mattrick from Microsoft Corporation (NASDAQ:MSFT), and in doing so, it breathed new life into a stock that has been on life support for months.


The details are scant, but are expected to surface by the end of the month when Zynga Inc (NASDAQ:ZNGA)’s second-quarter results are revealed.

For Microsoft Corporation (NASDAQ:MSFT), it’s a loss, especially considering the company’s recent push into gaming. It’s all smiles over at Zynga Inc (NASDAQ:ZNGA), where the company is showing a united front.

Mark Pincus and Don Mattrick (Source:  Zynga)

Unorthodox to have the outgoing CEO making room for new blood? Maybe. But unlike former Groupon Inc (NASDAQ:GRPN) chief executive Andrew Mason, who after being ousted from that company tapped into his musicality and released a CD entitled “Hardly Workin’,” Pincus doesn’t seem to be singing the blues. That’s because Pincus won’t be leaving Zynga Inc (NASDAQ:ZNGA); he’ll stay on as chairman of the board and the chief products officer. If the pair can pull it off, it could not only be a game changer for Zynga Inc (NASDAQ:ZNGA) but could also set a new precedent for other businesses.

Turnaround king

If a turnaround is what Zynga wants, and it is certainly what the company needs, then it has picked the right guy for the job. Mattrick is credited with having grown Microsoft’s Xbox 360 distribution by some 700% to surpass 75 million consoles, according to Zynga.

Mattrick is an entrepreneur who sold his first company to Electronic Arts Inc. (NASDAQ:EA) more than two decades ago. He would then go on to become the president of Electronic Arts Inc. (NASDAQ:EA)’s Worldwide Studios division before inheriting the same title for Microsoft’s Interactive Entertainment business.

While Zynga has had its struggles since losing its exclusive partnership with Facebook Inc (NASDAQ:FB), the company is sitting on about $1.6 billion in cash and cash equivalents as of March 31. There is $186 million remaining in an existing share buyback program, and after repaying its long-term debt of $100 million in April, the company has “no debt outstanding,” according to its most recent earnings report.

As I pointed out in a recent entry, Zynga needs to reinvent itself if only to stay relevant. This is a step in the right direction and investors rewarded the stock with 6% gains when the development surfaced. But, a good day does not erase the free fall that the stock has suffered since the company first went public in 2011.

After cutting its workforce by some 18% last month, Zynga is calling for a second-quarter net loss of between $28.5 million and $39 million. With the exception of Farmville 2, Zynga’s games haven’t been delivering. After reporting $230 million in bookings in the first quarter, Zynga is expecting a decline in bookings for 2013 because strength in Farmville 2 isn’t enough to offset weakness elsewhere. While 2013 is clearly a year of transition for Zynga, the company is making a push from web to mobile to capture more of the estimated $9 billion social gaming market.

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