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Brain Drain Continues at Zynga

Gaming company loses its chief creative officer


After reaching an all-time low of $2.66 in early August, Zynga‘s (NASDAQ:ZNGA) stock has staged a nice rally, and just a week ago, the shares had recovered to $3.30. But the continued loss of key people has turned Zynga back around, and the stock is back around the $3 mark after a 2%-plus drop-off Wednesday.

The brain drain at Zynga shouldn’t be a surprise, as ZNGA’s compensation is focused primarily on stock grants.

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The latest defection came this week. According to a report in AllThingsD, Zynga Chief Creative Officer Mike Verdu has left the company to create a startup that will focus on mobile games. Zynga is an investor in the deal, but it’s a clear sign that the company’s top minds see better opportunities elsewhere.

Zynga also lost its chief operating officer, John Schappert, who was a former bigwig at Electronic Arts (NASDAQ:EA) and other departures include Alan Patmore (general major of CityVille), Erik Bethke (general manager of Mafia Wars 2) and Ya-Bing Chu (vice president of the mobile division).

There’s a chance these moves could be beneficial. Zynga has had a dry spell coming up with new blockbuster titles, so maybe being forced to go out and find new talent will be for the best. But even optimists should expect the defections to inevitably be disruptive, at least for the next few quarters.

In the meantime, Zynga continues to suffer from a slowdown in its Facebook (NASDAQ:FB) and mobile segments. For example, its recently launched TheVille game has seen a decline in daily active users from 7 million to 4 million in the past month.

It looks like $3 is a support level for Zynga, but the company is in the middle of some major transitions that will take time to pan out. While ZNGA probably will present some nice short-term trades, any long-term investors considering the stock still don’t have enough reason to jump in yet.

Tom Taulli runs the InvestorPlace blog IPOPlaybook, a site dedicated to the hottest news and rumors about initial public offerings. He also is the author of “All About Short Selling” and “All About Commodities.” Follow him on Twitter at @ttaulli. As of this writing, he did not own a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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