The recently appointed Chief Executive Officer of the social
), Don Mattrick, is in the process of restructuring the company's
management hierarchy. This process, while reducing the layers of
hierarchy, is expected to increase management's efficiency.
Zynga recently announced that the Chief Operations Officer,
David Ko, Chief People Officer, Colleen McCreary, and Chief
Technology Officer, Cadir Lee, are leaving the company to pursue
other interests. We, however, believe that this is a strategic
move made by management to replace people in some key positions
to increase efficiency or reduce cost.
As part of the restructuring process, Zynga is trying to bring
the functional heads closer to the CEO. So, now the
functional heads from studios, tech, live ops, publishing, legal
and HR will interact with Don Mattrick directly. The company is
also making this process effective through regular meetings.
Zynga has been struggling a lot in recent times, and the stock
price has moved down by 17% since Jul 25, following the company's
decision to not enter the online-gambling business in the United
States. Due to its troubled business fundamentals, Zynga
forecasted third-quarter sales and earnings will be short of
Although Zynga is the developer of the famous
, it has been unable to build a loyal customer base, leading to a
drop in revenues. The company witnessed a decline in its daily
active user base by 45% to 39 million during the second quarter
which is one of the main reasons behind the bleak third-quarter
Zynga has been trying to boost its competitive position in the
mobile gaming segment through the launch of mobile games for
) iOS platform; the strategy is yet to yield satisfactory
To revive growth, Zynga has undertaken several cost-cutting
initiatives, which included spending cuts in technology outside
services, labor costs and marketing. These resulted in a 29.0%
decrease in costs to $261.1 million in the second quarter.
Sequentially, costs were down a modest 2.8%.
We believe that Don Mattrick's strategic moves will boost
visibility, which will help Zynga to return to profitability
in the near term.
He is known for speaking his own mind to superiors and also
for his management style. Since it is now clear that his
management style is independent from that of Mark Pincus, the
founder of Zynga, we believe that things may revive after a
couple of quarters.
However, a fragmented gaming market and stiff competition from
the likes of
Electronic Arts (
are the primary headwinds in the near term.
Currently, Zynga has a Zacks Rank #3 (Hold).
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