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Zynga's Pincus withdraws from operations amid turnaround

Zynga CEO Mark Pincus speaks during the Zynga Unleashed event at the company's headquarters in San Francisco, California June 26, 2012. REUT
Zynga CEO Mark Pincus speaks during the Zynga Unleashed event at the company's headquarters in San Francisco, California June 26, 2012. REUT

By Malathi Nayak

SAN FRANCISCO (Reuters) - Zynga Inc co-founder Mark Pincus is relinquishing the last of his operational duties at the social gaming company starting on Wednesday and retreating to an advisory role as Chief Executive Officer Don Mattrick pushes through a restructuring plan.

Zynga shares were up 5 percent in after-hours trading on Wednesday after closing at $4.42 on the Nasdaq.

Pincus, who remains chairman of the board, has decided to move on from day-to-day operations as chief product officer, Zynga said in a statement. He has been stepping back from the company that once dominated gaming on Facebook with "Farmville" and raked in over $1 billion in revenues, but is losing users to mobile game developers.

Pincus still has a strong grip over Zynga's management and corporate decisions because he owned 9.7 percent of the company with total voting power of 62 percent as of March 31, according to a regulatory filing last week.

On Wednesday, the company reported a 36 percent drop in March-quarter revenue to $168 million, although that beat analysts' forecasts of $146.5 million.

The number of monthly players continued to fall, slipping to 123 million, or less than half of 253 million at the end of the first quarter of 2013.

In July, Zynga hired Mattrick, the former head of Microsoft Corp's Xbox business, to replace Pincus as CEO. Mattrick has been managing a series of layoffs, cutting costs, reviewing the company's product pipeline and reshuffling top-level management.

In an interview, Mattrick said Pincus' decision to withdraw from a management role is a "vote of confidence" in his team's turnaround strategy and push into mobile gaming.

The company posted bookings of $161 million in the first quarter, a drop from $230 million a year ago. After a gap of two years, bookings grew sequentially from the last quarter.

"We grew from Q4 to Q1 and that's the first step to expanding audience … you've got to start posting quarter-over-quarter growth before you can post year-over-year growth," Mattrick said.

The company said it expects to see revenue in the range of $140 million to $160 million in the second quarter. For 2014, it forecast bookings in between $770 million and $810 million and non-GAAP earnings per share between 1 cent and 3 cents.

MOBILE PUSH

Pincus, 48, helped craft Zynga's business model of selling virtual goods in Facebook games and steered the company through its IPO in 2011.

Shortly after it went public, the company saw gamers flee from the Facebook platform to smartphone and tablet games. Zynga held onto its social gaming roots and was caught off guard as a mobile game wave gave rise to rivals such as "Candy Crush Saga" maker King Digital Entertainment Plc and Supercell that focused on growth from mobile games.

Under Mattrick's leadership, Zynga launched a version of its "FarmVille" game for mobile devices called "FarmVille 2: Country Escape" last week. It also acquired mobile game company NaturalMotion, known for its "Clumsy Ninja" game, for $527 million in January.

"FarmVille 2: Country Escape" has been installed 4 million times since its release on April 17, the company said.

"We've been able to crack the top 20 in terms of grossing revenue (on Apple's iOS), Mattrick said. "It bodes well for the future."

Zynga also announced on Wednesday that it hired Alex Garden, a former executive of Microsoft's Xbox business, as president of Zynga Studios, a newly created position overseeing the company's game studio operations.

Henry LaBounta, who has worked at Electronic Arts and Microsoft Studios, has also been brought on board as Zynga's chief visual officer, and Jennifer Nuckles, formerly of e-commerce portal Plum District and Clorox, will become chief marketing officer, the company added.

(Reporting by Malathi Nayak; Editing by Steve Orlofsky, Tom Brown and Andre Grenon)

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