Microsoft Corporation (NASDAQ:MSFT) has had some turmoil at and near the top of its entertainment division food chain of late. First, there was a lot of hype over its latest and greatest entertainment device, the Xbox One, a little more than a month ago – but in the days that followed, the feedback has generally been that the console does not live up to the hype, though it actually won’t hit store shelves until just before the holiday shopping season. But then, mere weeks later, as Redmond was getting some heat for charging too much for its console and the device not being much in the way of revolutionary compared to its Xbox 360 or even the competitor PlayStation 4 by Sony, veteran gaming guy Don Mattrick left Microsoft as head of the entertainment division to become CEO at Zynga Inc (NASDAQ:ZNGA), a company that seems to be on its last legs.
However, once the announcement was made that Microsoft Corporation (NASDAQ:MSFT) was losing Mattrick to Zynga Inc (NASDAQ:ZNGA), Zynga stock rallied to make up nearly all of its losses from a recent trough and the stock price – while down 66 percent from its IPO in late 2011 – is up 45 percent on the year. But Mattrick will have his hands full, many analysts believe, because he will be put in a position to turn around a company that was left behind by Facebook Inc (NASDAQ:FB) and has not been able to secure a decent market position on mobile. And Mattrick will have the extra complication of replacing a CEO who will actually still be in charge thanks to the way the company is set up. Yes, Zynga founder Mark Pincus will be handing over the CEO title to Mattrick, but Pincus will still have final say on most company matters.
But does Mattrick’s arrival at Zynga Inc (NASDAQ:ZNGA) hurt or help any chance Microsoft Corporation (NASDAQ:MSFT) might take to buy the gaming company? The only reason we bring this up is because a story surfaced recently that mentions that Mattrick supposedly attempted to buy Zynga for Microsoft Corporation (NASDAQ:MSFT) as far back as 2010, a full year before Zynga went public. While Pincus and Mattrick are friends, the story seems to imply the coincidence that Microsoft would make a play for Zynga in an attempt to shore up its Xbox social-gaming platform, and a couple of short years later, the head of that same Xbox entertainment division at Microsoft takes over at Zynga.
Of course, the story does not quote anyone specific, instead labeling the sources as “familiar with the talks.” But Zynga Inc (NASDAQ:ZNGA) started out like a gangbusters startup, with such social games as “FarmVille” dominating the gaming market on Facebook Inc (NASDAQ:FB).
So what happened, and where do these social-gaming companies go from here?
When Facebook decided to change its layout to the “Timeline” format on most profiles and pages, access to the available games stopped being easy, as Zynga and other companies suffered greatly. But now, with Zynga needing to develop more of a mobile presence and have less reliance on web-based gaming, it would be interesting to see if Mattrick, who spent more than 10 years at Electronic Arts, will be able to transition his experience with console gaming and create a mobile environment for Zynga to thrive – and if so, will that prompt Microsoft Corporation (NASDAQ:MSFT) to take another crack at Zynga to diversify its gaming options?
What are your thoughts? Do you think Microsoft Corporation (NASDAQ:MSFT) investors like fund manager David Einhorn (see his full equity portfolio) will appreciate Mattricks’s move, or do you think they would eye a Zynga Inc (NASDAQ:ZNGA) acquisition in the near future? Let us know in the comments section below.