Zynga has replaced founder Mark Pincus as chief executive, bringing in Xbox head Don Mattrick to try to pull off a turnround at the former star of social gaming.
Mr Mattrick’s move robs Microsoft of its top video games executive at a key moment in its rivalry with Sony and Nintendo, as it prepares for the launch of its first new console in eight years.
While remaining as chairman at Zynga, Mr Pincus’s yielding of the top executive job marks one of the most dramatic recent falls from grace in the consumer internet industry.
It echoes the replacement earlier this year of Andrew Mason as chief executive of Groupon, another formerly hot internet company whose shares collapsed in the wake of a high-profile initial public offering.
Zynga said Mr Pincus would stay on as chairman of its board and take on the role of chief product officer. Its shares jumped by more than 10 per cent on Monday after the leadership changes were first reported on the Allthingsd website.
Mr Pincus’s leadership of Zynga has proved controversial since the company’s fortunes turned down a year ago. He has gained a reputation for harsh treatment of employees whom he thinks are underperforming and has attracted criticism for stripping some executives of equity awards previously promised by the company.
His management style came under scrutiny after early hits like Farmville lost momentum and follow-on games failed to build a solid following. Mr Pincus has also struggled to prove that Zynga can thrive beyond the shadow of Facebook, as he has tried to build an online platform which would reduce the company’s dependence on the social network.
Zynga recently cut Mr Pincus’s salary to $1 for 2013 and said he would not receive a bonus or any awards of extra equity. However, he has faced far bigger financial loss from the collapse in the company’s shares. Zynga’s IPO at close to the peak of its fortunes in late 2012 turned him into a paper billionaire, valuing his stake at $1.4bn by early last year. His shares are currently worth under $300m.
Mr Pincus has held the voting power to determine his own fate at the company he founded. Despite holding only 12 per cent of Zynga’s shares, he controls 61 per cent of the votes through a special class of voting stock, leaving him with full personal control of its boardroom.
Zynga’s unusual equity structure will leave Mr Pincus with the final say over Mr Mattrick’s plans to turn the company round.
Steve Ballmer, Microsoft chief executive, paid tribute to Mr Mattrick in an email to employees, saying he had set the company “on a path to completely redefine the entertainment industry”.
Echoing other recent management transitions at Microsoft, he said the Xbox division would report directly to him, without adding if this would be for a temporary period or part of a new management structure.
Mr Mattrick, a former head of the games studios at Electronic Arts, joined Microsoft in 2007 to run the Xbox division. Since then, the console has cemented its position as the market leader in the US.
He has this year sought to reposition the device as a more general-purpose living room machine, with plans for the forthcoming Xbox One to act as a broader hub for content coming to the TV.
Microsoft was forced to back down over some of its plans for the machine, however, after an outcry from gamers over plans to limit their ability to play games offline or to sell games they no longer play to other players.
Richard Greenfield, an analyst at BTIG Research, said: “My sense is that employee morale has suffered a lot over the past 18 months,” making a change at the top of Zynga necessary.
To turn Zynga round, Mr Mattrick would have to show that it could produce hit games again, said Mr Greenfield, with particular pressure building on the all-important mobile side, where Zynga has yet to come up with a homegrown success.
Several analysts pointed out that despite more than 30 years’ experience in the games business, Mr Mattrick had no previous experience of mobile.
Michael Pachter, an analyst at Wedbush Morgan, said the timing of Mr Mattrick’s departure from Microsoft was a surprise given the imminent launch of the Xbox One, the development of which he has personally steered in recent years. It was also surprising that he had opted for Zynga rather than moving back to Electronic Arts, which is looking for a new chief executive.