Zynga CEO Don Mattrick Leaves Company

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Zynga's headquarters in San Francisco.

Zynga’s headquarters in San Francisco.

APRIL 9, 2015 • Don Mattrick has relinquished his positions as Zynga CEO and board member.  The company formalized a separation agreement with Mattrick through which all parties concurred that his employment would terminate on April 8. The agreement provides up to $25,000 to Mattrick to cover fees for legal advice during the negotiation of the separation compact. Mattrick received the final agreement on April 5 and had 21 days in which to accept the document, although he signed on April 8. As the settlement provides for a seven-day period for Mattrick to revoke his acceptance, his termination does not officially take effect until April 16. In return for not disparaging Zynga for four years, and abiding by prior confidentiality agreements, Mattrick receives $4 million in installment payments during the next 24 months, a lump sum cash payment of the lesser between $1 million and whatever cash bonus for 2015 he may be due, full vesting of his various company stock options, and pre-paid COBRA health benefits for up to 18 months. Mattrick joined Zynga in July 2013 shortly after leaving Microsoft Corp. as head of the Xbox business. Zynga chairman Mark Pincus returns as CEO for $1 a year in salary plus bonuses.

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Impact: While Zynga is painting Mattrick’s departure as a resignation mutually acceptable to both sides, it is obvious by the terms of his separation that he was asked to leave. The termination was done in a civil fashion, with strong financial incentives for Mattrick, but this was a termination pure and simple. Executives resigning of their own volition do not enter into negotiations to set the terms of their leaving with the proviso the company pays them $25,000 to cover legal counsel during the process. The larger question is why Mattrick was asked to leave? Two years ago DFC noted that Mattrick turning Zynga around was a long shot. Pincus already had charted the wholesale transition to mobile content creation with the emphasis on mid-core games with a harder edge. The problem was Pincus was having difficulties executing on that strategy and investors were getting skittish. This led to the management transition that saw Mattrick getting hired. Since 2013, Mattrick’s greatest success was staunching the bleeding and stabilizing Zynga by better managing costs. Unfortunately, during this period Mattrick was unable to publish a blockbuster hit on mobile similar to Clash of Clans that could boost revenue. This was at the same time he brought in his own people into executive positions and squeezed Pincus out of any day-to-day role in operations a year ago. As there was no investor lynch mob calling for Mattrick’s ouster, the signs point to Pincus orchestrating his own return to the chief executive’s chair. To date, Pincus has shown an inability to develop content that can dominate market share in a competitive environment. Perhaps his time away from hands-on managing has led him to a better understanding of how to reach consumers already bombarded by compelling titles. We remain skeptical, however.

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