Tuesday, July 31, 2012

(BN) Zynga COO Said to Lose Product Oversight as Growth Slows

Zynga Inc. (ZNGA) Chief Operating Officer John Schappert, who was wooed from Electronic Arts Inc. (EA) last year, was stripped of his role overseeing game development in a reorganization aimed at reviving growth and making more money from mobile services, people familiar with the matter said.

David Ko, who runs Zynga's mobile operations, and Steve Chiang, executive vice president of games, both of whom reported to Schappert, now report directly to Chief Executive Officer Mark Pincus, said the people, who asked not to be identified because the plan hasn't been disclosed.

Pincus embarked on the overhaul in early July, at the close of a quarter marked by slowing sales growth and a drop in demand for virtual goods. Schappert, lured with a pay package worth $42.8 million, has lost support within the company and taken some of the blame for underperformance, the people said.

"The place is in utter meltdown mode," Richard Greenfield, an analyst at BTIG LLC in New York, said in an interview. "The real question I think everyone should be asking is why it took reporting a collapse in earnings to make a management change."

Stephanie Hess, a spokeswoman for San Francisco-based Zynga, declined to comment.

Shares of Zynga fell 2 percent to $2.95 at the close in New York. The stock has dropped 71 percent since the company held its initial public offering in December. The decline accelerated last week after Zynga reported sales and profit that missed analysts' predictions.

Mobile Priority

The reorganization was aimed in part at making mobile- software development more of a priority across Zynga, the people said. Ko will work with Chiang to involve more of the company's best designers on apps for smartphones and tablets, they said.

Zynga makes money by selling virtual goods within its games -- say, a gun in "Mafia Wars" or a tractor in "FarmVille."

Renewed emphasis on mobile may help Zynga lessen its reliance on Facebook Inc. (FB), which accounts for about 80 percent of bookings, or the total value of virtual goods sold in its games. Zynga contributes 14 percent of Facebook's revenue, the Menlo Park, California-based social network said today in a filing.

Schappert joined Zynga in April 2011 after spending much of his career at its chief rival. He began at Electronic Arts in 1998 when the game giant acquired his development company, Tiburon Studios. He left in 2007 to head Microsoft Corp.'s Xbox Live unit before returning to EA in 2009 as president and chief operating officer.

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