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Zynga CEO Mattrick leaves abruptly, replaced by founder Pincus

Don Mattrick, Zynga's current CEO, will depart the company immediately after less than two years on the job. He had previously run Microsoft's Xbox business.

Former CEO Don Mattrick, left, and founder Mark Pincus, in a 2013 photo announcing Mattrick's hiring. Zynga

It's not such a sunny day in the world of FarmVille.

Zynga CEO Don Mattrick has abruptly left the company, to be replaced by his predecessor, company founder Mark Pincus, the company announced Wednesday.

The company said in a statement ahead of its planned first-quarter conference call in May that Mattrick, who joined after leading the Xbox video game group at Microsoft, is leaving Zynga and its board of directors after less than two years at the helm.

"I believe the timing is now right for me to leave as CEO and let Mark lead the company into its next chapter given his passion for the founding vision and his ability to couple our mobile progress with Zynga's unique strengths," Mattrick said in a statement.

Mattrick's exit may not come as much of a surprise, say analysts. "In the game industry circle, Don Mattrick was presumed to be seeking an exit," said Colin Sebastian, an analyst at RW Baird. "More of a surprise is Pincus returning. He clearly wants to reestablish credibility with gamers and Wall Street."

A lot will be riding, Sebastian added, on how Pincus steers Zynga's new game releases in the coming months. Pincus owns around 10 percent of Zynga and has about 60 percent of voting rights, which allowed him to remain influential at the company even during Mattrick's tenure.

Following Mattrick's announcement Wednesday, the company's shares fell more than 9 percent to $2.63. The company's shares have fallen more than 30 percent in the past year.

Struggling for a hit

Zynga made its name by popularizing games made not for enthusiasts or war buffs, but for general audiences. One of its biggest hits was FarmVille, which encouraged players to tend to a farm in the game, plowing fields, minding cows and helping friends. The game became a hit, particularly on Facebook's website, where players could send messages to friends enticing them to play.

But the move to mobile devices -- a major shift of players within the video game industry turning to titles made for smartphones and tablets -- was faster than the pace at which Zynga's teams could make games. Ultimately, Zynga failed to garner as much influence as it did in its earliest days.

"There's a lot to be said about being early," said Adam Krejcik, an analyst and managing director at Eilers Research. "They absolutely had that on Facebook. For mobile, they entered the space late and it was a much different competitive landscape."

By the time Mattrick was named CEO in July 2013, Zynga was in free fall. The company's revenue and user base were declining rapidly. One of its highest-profile acquisitions, OMGPOP, had failed and the company began a series of layoffs that hurt morale and signaled trouble.

Mattrick promised change. He explained a plan to investors to make reliably successful games, largely by following industry trends. He also set agreements with the National Football League and Warner Bros. to create a series of sports games and titles based on the popular Looney Toons characters.

His highest profile acquisition was $525 million in cash and stock for NaturalMotion, a British video game technology company whose programs powered popular titles like Take-Two Interactive Software's Grand Theft Auto V. Using its technology, NaturalMotion also developed games for mobile devices, such as a silly game called Clumsy Ninja and a car game called CSR Racing, earning it the credibility Zynga lacked. Yet new titles developed by NaturalMotion have hit delays.

What Zynga does next depends largely on how well its titles developed under NaturalMotion perform, Sebastian thinks. "It still seems like a show-me story," he said. "If you're bullish on Zynga, you have faith in NaturalMotion."

Meanwhile, Zynga continues to struggle financially. The company's investors haven't returned to their early enthusiasm that pegged the company's value as high as $20 billion shortly after its initial public offering in 2011. Since Mattrick joined, the company's stock has hovered around $3 a share.

While the stock has remained flat, the company's sales have sunk since going public. Last year, Zynga pulled in $690 million in revenue, down from $1.14 billion in the 2011. The company's fluctuating losses also continue to cause concern, reaching $266 million last year, up from $209 million in 2012.

Update at 2:30 p.m. PT: Added additional details.