Can Zynga Find Success Through C-Suite Cuts?

by Tom Taulli | August 14, 2013 2:03 pm

While Internet stocks like Facebook (FB[1]) and Yelp (YELP[2]) have soared in the past couple of months, one stock has been left out of the party: Zynga (ZNGA[3]).

Once the hottest social game developer on earth, the company has started to look like it would become another piece of tech history … but there might still be hope. Zynga recently hired Don Mattrick, the former head of Microsoft’s (MSFT[4]) wildly successful Xbox franchise, and he has wasted little time in making changes.

Yes, that means he’s been issuing pink slips, but they haven’t initially gone to the rank-and-file employees. Rather, Mattrick has pushed out senior executives, such as COO David Ko, CTO Cadir Lee and Chief People Officer Colleen McCreary.

With those executives presiding over Zynga, the company went into a tailspin. In the second quarter, the company’s revenue dropped by 31% to $231 million and the net loss came to $16 million. The daily active users — on a YOY basis — collapsed by 45% to 39 million.

It was a horror show.

Despite all this, Mattrick still sees tremendous potential. According to a recent memo[5]:

“I have been working with our leaders to review different parts of our business in order to develop a set of operating principles to help reset the company. We are now calibrating against the market opportunity and developing detailed plans to achieve topline growth and improve profitability in the future.”

It sounds like Management 101 — instilling the kind of discipline that powers great companies like Microsoft, but has been severely lacking at Zynga.

Mattrick’s first move — kicking out senior executives — is definitely smart. It sets the tone that Mattrick is serious and will not flinch from making tough decisions. The memo also points something out that’s important: “We are taking layers out of the executive rank to get senior leaders closer to important product initiatives.”

Basically, the only cure for Zynga’s problems is to once again get obsessive about making amazing products. It’s really that simple. And anything that gets in the way must be eliminated.

The company still has a long way to go, but so far, Mattrick’s actions are encouraging. Who knows, maybe within a few quarters, Zynga can also start join Wall Street’s Web 2.0 party.

Tom Taulli runs the InvestorPlace blog IPO Playbook[6]. He is also the author of High-Profit IPO Strategies[7]All About Commodities[8] and All About Short Selling[9]. Follow him on Twitter at @ttaulli[10]. As of this writing, he did not hold a position in any of the aforementioned securities.

Endnotes:
  1. FB: http://studio-5.financialcontent.com/investplace/quote?Symbol=FB
  2. YELP: http://studio-5.financialcontent.com/investplace/quote?Symbol=YELP
  3. ZNGA: http://studio-5.financialcontent.com/investplace/quote?Symbol=ZNGA
  4. MSFT: http://studio-5.financialcontent.com/investplace/quote?Symbol=MSFT
  5. recent memo: http://techcrunch.com/2013/08/13/zynga-shakeup/
  6. IPO Playbook: http://investorplace.com/ipo-playbook/
  7. High-Profit IPO Strategies: http://goo.gl/TXQsz
  8. All About Commodities: http://goo.gl/FfP8R
  9. All About Short Selling: http://goo.gl/t5Jzb
  10. @ttaulli: https://twitter.com/ttaulli

Source URL: http://investorplace.com/2013/08/zynga-can-it-join-the-social-media-party/
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