Since then, EA had a major drop-off from 2008-2010 as the company lost its investor appeal for the time being, but has rebounded nicely over the last four years. It should continue the trend with the exclusive deal with the Xbox One and the PS4 for the new Ignite cloud gaming system, this company will have a very successful few years with the next generation of game consoles coming out this fall.
Zynga seems to be the perfect fit for Mr. Mattrick because Zynga has some of the same problems, but the company appears to be trying to fix them. In June, the workforce was trimmed by 18%, though more cuts may be necessary. In addition, Zynga has to have a greater presence in the app market, since Facebook appears to be tapped out in terms of a place to expand and with the popularity of smartphones increasing each year. In Don Mattrick, they have a guy that had faith in Zynga’s business model enough to try to buy the company for Microsoft, showing that there may be potential yet for Zynga Inc (NASDAQ:ZNGA)’s brand of games, saying that Zynga is the “road ahead” in the gaming world.
Mattrick vs. Pincus?
It’s a big investment for Zynga, offering $50 million in salary, bonuses, and stock options to lure Mr. Mattrick away from Microsoft, but during his time with Microsoft and EA, he had been responsible for some of their biggest successes, from the Xbox One and Xbox Live Marketplace to EA’s mid-2000’s rally.
However, despite Mr. Mattrick’s place as CEO, and his track record, Mark Pincus still has the last say at the company. This could create problems for Zynga because it is expected that Mr. Mattrick will call the shots to save the company, as he should, but Mr. Pincus may threaten to undermine some of the more sweeping changes. This tension could delay Zynga’s revival for months, but if Mr. Pincus either leaves the company or relinquishes some decision making ability, Zynga will be more likely to grow and adapt.
There is also the chance that with Mr. Mattrick on board, Zynga could become more attractive to bigger companies like Microsoft as a buying opportunity like it was a few years ago. Through a buyout, it could have more access to platforms to launch games beyond Facebook, which is able to grow on the strength of the brand rather than rely on outside developers, not to mention King.com is the current king of the Facebook gaming community, leaving little room for Zynga Inc (NASDAQ:ZNGA) to make a splash.
Not a Buy yet
Zynga may no longer have one foot in the grave, but it isn’t quite a Buy either. It would be wise to wait for news regarding either potential sale of the company, or waiting to see what Mark Pincus does now that he’s no longer the CEO. If Don Mattrick has his way, Zynga will take off. If there is board room tension, it will be a waste of $50 million on a rejected lifeline. In the meantime, look to Microsoft and EA for good investments knowing that they will both benefit from the Xbox One launch this fall, and watch Facebook to see if King.com’s popularity translates into a buy opportunity for Facebook as it tries to get back to its initial price.
The article How Zynga Can Come Back originally appeared on Fool.com and is written by John McKenna.
John is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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