Why Zynga Needs Fresh Blood, Not Former CEO Mark Pincus

Mark Pincus, founder and chairman of Zynga Inc (NASDAQ: ZNGA), has returned to his role as the company's CEO.

This decision might surprise some investors, who wondered if former Microsoft Corporation (NASDAQ: MSFT) exec Don Mattrick could take the company to the next level.

Cody Willard, chairman of Scutify (a financial social network), told Benzinga that he'd "rather see some fresh blood" within the company.

"If Pincus was the right guy, why did he leave in the first place?" Willard questioned.

Revolving Door

Rob Enderle, principal analyst at Enderle Group, detailed the vicious circle that has plagued Zynga.

"Sometimes when the company gets into trouble they take a look at warm bodies to take senior roles," Enderle told Benzinga. "Often it's not the best you can get, it's who you can talk into taking the job. That's always an issue when you've got a property that's in trouble, and of course Zynga has been in trouble for a while. Finding a CEO that's qualified and will step in has clearly become difficult for them."

This led Zynga down a path where a "troubled ex-CEO is running a troubled company in the hope that maybe there will be some magic and something wonderful will emerge."

"Unfortunately, it tends to be more of a revolving CEO door, and that's what they're facing at this particular time," Enderle added.

Open Your Wallet

Willard and Enderle agree that Zynga needs to use its cash wisely.

"At some point they gotta start spending that cash like they're saying: either make some talent acquisitions or develop entirely new, original games," said Willard. "They've got the cash to do some of that though. It's sort of dumbfounding that the company isn't spending more to grow. It's such a small company. Basically, it was a bet on Facebook's desktop. That translated into a little bit of app success, but they need something entirely new."

Zynga isn't a cash-generating machine, however. Enderle said that it has only stayed afloat because of the money it received during the company's early success.

"At the end, what they need to do is acquire top talent and make a run for having some class-A titles targeting whatever customer base they want to go after," said Enderle. "Anything short of that, they're just rearranging the chairs on the Titanic."

Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.

Image credit: tarikgore1, Flickr