Can the Man Behind Xbox Save Zynga?

Don Mattrick, president of the Interactive Entertainment Business at Microsoft.
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Don Mattrick, president of the Interactive Entertainment Business at Microsoft.

Don Mattrick is the hero of Microsoft's Xbox team. It was under his leadership that the videogame console rose to the top of the market—and finally became profitable.

Now, he's hoping to pull of a similar miracle at Zynga—but it's a move that has left investors, Microsoft and the gaming world baffled.

On Monday, Microsoft and Zynga confirmed that Mattrick will take over as CEO at Zynga, effective July 8.

But there are still plenty of questions about Mattrick's decisions. Why leave Microsoft? Why go to Zynga? Can Mattrick turn things around at the company? And what, if anything, will this mean for the Xbox One as it gets close to its launch window?

Mattrick is a gaming industry veteran. While he has spent the last six years overseeing the Xbox division, he spent the previous 25 at Electronic Arts, ending that tenure as president of worldwide studios. At age 17, he founded Distinctive Software, which created the Test Drive racing games. (Distinctive was acquired by EA in 1991.)

Earlier this month, reports began to surface about a planned restructuring at Microsoft. Mattrick was mentioned as one of three executives who would benefit from the changes, but it's possible he did not get the position he wanted and decided to move.

"Mattrick is not a Microsoft-y," says John Taylor, managing director of Arcadia Investment. "He's not a career Microsoft guy...It's possible the culture of Microsoft, which first and foremost looks after its own, was one he got along in, but wasn't necessarily going to reach his final career goals in."

Mattrick's departure comes at a seemingly odd time, but there have been whispers floating for a few months that he was considering a move. Many industry insiders expected that he might take the vacant CEO position at EA after John Riccitiello's departure from that spot. Some analysts think that would have been a better choice for Mattrick.

"I don't really understand the appeal of Zynga," said Michael Pachter of Wedbush Securities. "It's a good hire for them, but I think he had a better personal opportunity at EA—and it's odd he's leaving Microsoft now. It makes it look like he's being blamed for the [Digital Rights Management] thing."

Microsoft has been under fire since announcing the Xbox One for the device's restrictive, Digital Rights Management-based security policies. Two weeks ago, though, the company reversed many of those guidelines, citing public pressure.

Zynga is a surprise at first blush, but there are some ties there for Mattrick. Among those are Kleiner Perkins partner Bing Gordon, who led the VC's investment in Zynga and spent 10 years as chief creative officer at EA. Also at Zynga is Steven Chiang, who previously ran EA's sports division.

While the company's stock has suffered, Zynga still has a healthy balance sheet. For fiscal 2012, the company reported cash and short-term investments of $1.3 billion.

The company is in the midst of trying to rebuild itself with the slowdown in gaming on social websites like Facebook.

Though it has been unable to put together a strong mobile presence, it has started focusing its efforts more on the core gamer—whom Mattrick knows very well. His business acumen has been widely praise, as well as his ability to manage large teams.

"One of the things Zynga has currently, which is a real problem, is a culture which is not friendly to core game industry people and which does not encourage loyalty," says Taylor. "Mattrick is a guy who could build a team of folks who have the skills and talent and entertainment chops to be able to earn an audience back...Team-building is super important and getting people focused on who the customer is and building games to attract that player is going to be critical."

Running Zynga comes with a unique challenge, though: founder Marc Pincus. With roughly 70 percent of the company's voting stock, he is the ultimate decision maker—no matter who sits in the CEO chair.

Analysts think the only way Mattrick would have taken the position is if he received assurances from Pincus that he would not interfere with how the company is run.

A departure as high-profile as Mattrick's is bound to raise some concerns about the Xbox One, especially with that system's launch so close. While some might see the move coming as a result of the system's PR problems, others could view it as a lack of faith in the company's strategy.

"It's the biggest product launch in the past 10 years for the company—[and] for the next 10 years," says P.J. McNealy, CEO and founder of Digital World Research.

Wedbush's Pachter added that investors are right to question the abruptness of the move.

"The timing is weird," he said. "I don't know why he didn't tell Zynga, 'I'd love to go there. I'll be there in February.'"

Taylor, though, is a bit less worried.

"Clearly the departure of someone of Mattrick's status is going to have some sort of an impact," he said. "But I think there was a lot of planning and a lot of thought in getting Xbox One to where it was four weeks ago—and I think they've got an awful lot of momentum."

As for who's next in Mattrick's role, it's a fairly wide open field right now. Some have suggested that director of marketing Yusuf Mehdi could be a candidate, while others wonder if John Schappert, who has held the COO positions at both EA and (until last year) Zynga, could be a candidate.

Adding to those whispers is the fact that Schappert was also a corporate vice president at Microsoft—in charge of the Xbox's highly profitable Xbox Live division.