Zynga Inc. (
regained Nasdaq compliance after it recently appointed
executive, Regina Dugan, and venture capitalist, John Doerr, as
independent directors. Zynga's share price, however, declined 0.99%
to close at $3.01 on Jul 9, 2014.
Last month, in a regulatory filing Zynga stated that it lost Nasdaq
compliance after two independent directors stepped down. In April,
the company had announced that two directors, LinkedIn's
co-founder, Reid Hoffman, and DreamWorks Chief Executive Officer
(CEO), Jeffrey Katzenberg, would not run for re-election.
Under Nasdaq rules, a public company needs to have majority
independent directors. Per Reuters, Dugan is the second female
director on Zynga's board alongside former Yahoo executive Ellen
Siminoff. Post the inclusion of Dugan, the board has a total of 9
Dugan's appointment is significantly strategic, in our view. Zynga
is aiming for a brand makeover under the leadership of new CEO Don
Mattrick. The beleaguered social game developer will benefit from
Dugan's expertise in handling critical engineering projects related
to tablets and smartphones at Google.
Zynga has had a rough time since it went public at the end of 2011,
including multiple rounds of layoffs, ill-considered acquisitions
and a soured relationship with
. Zynga debuted at $10.00 but now trades at around $3.00.
Year-to-date, share price has plunged 23.8%.
The decline in share price can be attributed to Zynga's failure to
respond to a market shift toward games played on smartphones. Post
Farmville, the company has failed to launch any game that fancied
Since CEO Mattrick took over the reins, three high-profile senior
executives left the organization. In April, founder, Mark Pincus,
handed in his papers, which was a huge blow to the company.
However, Zynga remained tight-lipped regarding the reason for these
exits. In a recent conference, CEO Mattrick failed to give any
visibility on the company's profit earning potential. Zynga has
reported loss in the last four quarters.
Moreover, he did not to provide any details either on the long-term
outlook or the future product pipeline of the company. This
pessimistic approach of the CEO coupled with the high-level
resignations at senior management shook investors' confidence to a
We believe that the new appointments will steer Zynga into safer
waters. However, the process will be tough due to intensifying
competition from the likes of King Digital,
Glu Mobile (
and Electronic Arts. The resurgence in physical game sales due to
Next Gen consoles will be a significant headwind at least in the
Currently, Zynga has a Zacks Rank #3 (Hold).
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