Zynga continues to rise after CEO switch
Zynga stock continues to rise after CEO switch but some analysts stay cautious
NEW YORK (AP) -- Zynga's decision to hire Microsoft's Don Mattrick as CEO sent the troubled online gaming company's stock higher for the second day on Tuesday as one Cowen analyst called it "too strange not to be true" but also "a bit odd."
THE SPARK: Mattrick, who hails from Microsoft Corp.'s interactive entertainment division, which houses the Xbox, will officially start at Zynga Inc. next Monday. Mark Pincus, who founded Zynga in 2007, will remain chairman and chief product officer. He will also keep his controlling voting stake in the company, Cowen's Doug Creutz noted, which makes it unclear "how much operating room Mattrick will really have."
ANALYST COMMENTS: Wedbush analyst Michael Pachter said he sees Mattrick's appointment as a positive sign, "although it is not without challenges."
"Zynga has seen its market leadership in social gaming wane, and finds itself neck-and-neck with King.com for social games dominance," Pachter wrote in a note to investors. King.com is behind the popular Facebook game "Candy Crush Saga," which is currently the No. 1 game on the site.
"Similarly, Zynga's plans to expand on mobile devices have taken seemingly forever; while the company has grown over the past year, it has as yet to generate a significant portion of its revenue from mobile," Pachter added.
Brian Pitz of Jefferies called Mattrick "an industry vet with a long track record of success," and said he is "supportive of the move." But he also noted the mobile challenge.
"As we wait to learn how the strategy will change under the incoming CEO, we note Zynga still faces the daunting task of creating hit mobile games," Pitz wrote.
BACKGROUND: Zygna went public in late 2011 at $10, but its stock price has fallen sharply since amid concerns about its ability to keep growing revenue and the number of people who play its games. Its games are still largely on the Web at a time when many players are switching to mobile games.
SHARE ACTION: San Francisco-based Zynga's stock rose 33 cents, or 10.8 percent, to $3.40 in morning trading. It is up 47 percent year-to-date but still well below its $10 IPO price.
