Microsoft Pretends to Be Sad

Microsoft Pretends to Be Sad

"Zynga announced today that Don Mattrick would be its new CEO, effective July 8. This is a great opportunity for Don, and I wish him success."
-- Steve Ballmer, in an email to employees

After Zynga announced that it was getting a new CEO by taking Don Mattrick from Microsoft's gaming business yesterday, I guess Microsoft had to put on a sad face. "Oh no," it cried. "The guy who helped us launch the Xbox One is going to a sort-of rival."

What no one brings up is that there are two scenarios that Mattrick could have left under. Either he knew he was leaving when the new Xbox was rolled out, or he thought he was staying. If he knew, then his lackluster attitude toward the new product makes a certain kind of sense, but it also makes him a liability. From the outside looking in, the options for Mattrick weren't great.

Moving along
Mattrick's launch of the Xbox One was greeted with limited enthusiasm. Gamers were happy to see a new system, but many questioned the requirement for an Internet connection, the rigid new digital rights management rules, and the $499 price tag. Then, during June's E3 video game conference, Sony unveiled its PlayStation 4, and the world went mad.

The revolution that the Sony announcement sparked was based on... no evolution. Used games will work like they currently do. Internet requirements, the same. As an added insult, the PS4 will cost $100 less than the Xbox One. By not changing anything, Sony put Microsoft on the defensive.

Mattrick was the face of the Xbox while the controversy swirled, and he didn't make all the right moves. For instance, when asked what gamers without reliable Internet connections should do, since the Xbox One needed gamers to check-in online once every 24 hours, Mattrick said, "Fortunately we have a product for people who aren't able to get some form of connectivity. It's called the Xbox 360." I don't want to vilify Mattrick, but "keep what you've got and be happy" was the wrong answer. It seems that Microsoft may have agreed, given that it pulled a dramatic 180 soon after E3.

The Zynga position comes with a significant title, as Mattrick will be CEO of the whole company instead of just one portion, like he was at Microsoft. That increased responsibility doesn't actually come with a bigger job. Zynga pulled in $263.6 million last quarter, while the entertainment and devices division that Mattrick is leaving generated $2.5 billion.

Who wins?
Even if it's not great for Mattrick's ego, he's the biggest winner overall. The Xbox bungling was made out to be bigger than it was by hardcore gamers and gaming media. The combination put Mattrick in a difficult PR position if he were to stay at Microsoft. By moving to Zynga, he can put that episode behind him.

Microsoft is no worse off. There are plenty of internal and external candidates for the role, and the evolving nature of the Xbox One means that even a new hire could make some real differences. I imagine that role will be filled in the next month, or possibly left vacant until after the launch.

While Zynga certainly doesn't lose in this scenario, it's clearly not the winner. The CEO position could have gone to someone who had a history of making real game-changing decisions. Mattrick is well-qualified, but that seems to be it. I can't imagine him being more than a manager -- but Zynga really needs a leader.

No Pitch

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Fool contributor Andrew Marder has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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