Zynga's Wise Man

(Corrects story originally published at 7:58 a.m. EDT to say that Don Mattrick left his post as head of Microsoft's Xbox unit.)

NEW YORK (TheStreet) - Shares of Zynga (ZNGA) rose yesterday on news that Don Mattrick is leaving his post as head of Microsoft's (MSFT) Xbox unit to run Zynga.

Some were surprised that Mark Pincus -- a guy who controls 60% of voting control of the company and someone thought of as a micro-manager -- would allow a professional manager to replace him. He had given multiple impressions that he wanted the job of Zynga CEO for life.

Clearly, though, Pincus wanted this move. No one puts someone with 60% voting control in a corner.

The reason why Pincus thought this was the best for his company was probably a lot to do with Mattrick and also something to do with Pincus' own realizations of his limitations running a company the size of Zynga in the current competitive environment.

Zynga's shareholders are fortunate that they have a CEO in Pincus who is able to see his own shortcomings, as well as to have built a company strong enough to attract a person the caliber of Mattrick.

It's easy to slam Pincus for not seeing the shift to mobile happen as fast as it did. How many did?

And Pincus wasn't in the fortunate position as Facebook  (FB) co-founder and CEO, Mark Zuckerberg, who could just respond to that shift by stuffing more ads in the newsfeed. I tip my hat to the Facebook team for reacting as swiftly as it did to pivot to mobile, but it didn't see that move to mobile coming any better than Pincus did. And Facebook isn't in an unforgiving hits business Pincus was.

Some critics like to jump on Pincus for selling stock in February 2012 before it collapsed. The guy started this company in 2007. Five years later, he wants to cash out some of his holdings? Are you really going to begrudge him that opportunity? Zuckerberg and Sheryl Sandberg, Facebook's chief operating officer, have sold some stock along the way. Isn't that capitalism? You want early venture capitalists to be able to sell all their stock and the entrepreneur can't sell any?

For anyone writing stories that Pincus was the problem with Zynga in the last two years, I'd counter by saying that there is obviously no Zynga without Pincus. There was nobody who slingshot a gaming company from nothing to a mega-something in such a short time like PIncus did from 2007 to 2009 -- in the middle of financial Armageddon to boot.

Some have asserted that the problem of Zynga's last two years is that Pincus couldn't give up control and he now must relinquish all control to Mattrick.

I don't agree with that at all.

I expect Pincus to continue to be actively involved in Zynga's business - his baby - as he was before. It's just he's the Chief Product Guy now, instead of the CEO guy.

Give up control? When was the last time you saw a 60% owner of a company do that? It's not going to happen. Mattrick knows that. Bing Gordon and John Doerr know that. And Pincus knows that.

The question is can Mattrick and Pincus work well together, each bringing his own strengths to the party in the service of helping Zynga be the best company it can be? I don't think Pincus would have pursued Mattrick as strongly as he did if he didn't believe that could happen. And Mattrick's old enough and successful enough not to put himself into a world of needless pain for the next few years.

The vision for Zynga's turnaround has always been clear:

Show the world it is capable of churning out multiple hit mobile games; turn Zynga's network into the most engaged gaming community in the world (like Xbox Live - and now they have the former chief executive of that); and turn Zynga into a two-way social communications platform like a Tencent.

We're clearly far away from the third part of that vision and Zynga's has a hard enough time just proving to the world it can do No. 1. However, Mattrick's 30-year track record shows he's clearly capable of taking Zynga all the way to the summit it's aiming for.

There's been a lot mentioned about what this change of organizational structure -- where a founder CEO brings in an outsider CEO to replace him -- means in relation to other successful tech companies with different structures. Is this better or worse that a Zuckerberg-Sandberg structure, a Schmidt-Page-Brin structure, or a Mason firing?

There are many ways to skin a cat in entrepreneurial tech companies. There's no one best way. But clearly Zynga's board and -- most importantly -- Pincus felt this new structure of Mattrick at the top with Pincus as Chair and Chief Product guy was the best for Zynga right now.

There's probably going to be some tough days and weeks ahead for the stock and company as Mattrick settles in.

People believe Yahoo's (YHOO) stock immediately spiked after Marissa Mayer was hired last July. It actually went sideways until late October, when the market finally got confidence in her turnaround plans. We might continue to see Zynga struggle to find its feet in the next couple of quarters.

I believe, however, we'll look back on this hire as a major catalyst for the stock in the coming years.

At the time of publication, the author was long Zynga and Yahoo.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Eric Jackson is founder and Managing Member of Ironfire Capital and the general partner and investment manager of Ironfire Capital US Fund LP and Ironfire Capital International Fund, Ltd. In January 2007, Jackson started the world's first Internet-based campaign to increase shareholder value at Yahoo!, leading to a change in CEOs in 2007. He also spoke out in favor of Yahoo!'s accepting Microsoft's buyout offer in 2008. Global Proxy Watch named Jackson as one of its 10 "Stars" who positively influenced international corporate governance and shareowner value in 2007.

Prior to founding Ironfire Capital, Jackson was President and CEO of Jackson Leadership Systems, Inc., a leadership, strategy, and governance consulting firm. He completed his Ph.D. in the Management Department at the Columbia University Graduate School of Business in New York, with a specialization in Strategic Management and Corporate Governance, and holds a B.A. from McGill University.

He was previously Vice President of Strategy and Business Development at VoiceGenie Technologies, a software firm now owned by Alcatel-Lucent. In 2004, Jackson founded the Young Patrons' Circle at the Royal Ontario Museum in Toronto, which is now the second-largest social and philanthropic group of its kind in North America, raising $500,000 annually for the museum. You can follow Jackson on Twitter at www.twitter.com/ericjackson or @ericjackson.

You can contact Eric by emailing him at eric.jackson@thestreet.com.

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