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Originally published July 1, 2013 at 8:00 PM | Page modified July 3, 2013 at 6:59 AM

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Xbox chief leaving Microsoft for Zynga

There’s been speculation that Don Mattrick’s move could have been motivated by a reorganization that Microsoft CEO Steve Ballmer has reportedly been working on and that could be announced as soon as Tuesday.

Seattle Times technology reporter

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Don Mattrick, head of the Microsoft division that produces Xbox, is leaving to lead social-game company Zynga — a move that could signal the first big-name jumping of ship from Microsoft in an expected companywide reorganization.

Mattrick, 49, who has been president of Microsoft’s Interactive Entertainment Business for three years, will become Zynga CEO and a member of its board starting Monday.

Mark Pincus, Zynga’s founding CEO, will remain chairman of the board and Zynga’s chief product officer.

There’s been speculation that Mattrick’s move could have been motivated by a reorganization that Microsoft CEO Steve Ballmer has reportedly been working on and that could be announced as soon as Tuesday.

The reorganization is believed to be part of Ballmer’s move toward transitioning the software company into a devices-and-services one.

Rumors of the changes include consolidation of Windows and Windows Phone into one division focusing on operating systems; an expanded role for Server & Tools Business President Satya Nadella — perhaps as head of a new enterprise division; the formation of a services and apps division, possibly headed by current Online Services Division President Qi Lu; and the placement of all hardware units, including Xbox and Surface, under one leader.

Mattrick’s name had been rumored as a possible head of that hardware division.

But now, some speculate, he may have lost out in a power struggle in the reorganization, and that the revealing of some of the initial requirements of the upcoming Xbox One gaming console, which angered many gamers, didn’t help.

Those Xbox One requirements — since reversed — included needing a regular Internet connection and limits on how used games could be given, shared or resold.

The announcements of the new console “failed to explain the vision and possibilities of the new design, leading to confusion and resentment from critical segments of the target audience,” said analyst Rob Sanfilippo, with independent research firm Directions on Microsoft.

Microsoft failed to predict Sony’s strategy for its upcoming PlayStation 4, which, among other things, undercut the Xbox One by $100, and “which has allowed Sony to win over mindshare that Microsoft had previously captured,” Sanfilippo said.

Those missteps could put Microsoft’s current strong position in the console market in jeopardy and “thus, accountability needs to be addressed and I believe we’re seeing at least the first of that with Mattrick’s departure,” he said.

Timing questioned

In any case, the timing of Mattrick’s announcement struck some observers as odd.

“I’m in shock,” said Lewis Ward, an analyst with the research firm IDC. “To leave five months before the unveiling of Xbox One, the next-generation platform, seems questionable and odd timing to me. I can imagine it happening six months or a year after the launch.

“But to leave beforehand has to make some people revisit or question the Xbox One strategy at a basic level,” Ward said.

As Ballmer restructures the company, it’s also clear that he wants Microsoft's offerings more tightly integrated with each other, including Windows 8 with the Xbox platform.

“I assume they looked in that direction and came to the conclusion that someone other than Mattrick was the right person to lead that charge,” Ward speculated.

Ward added that he was “doubly shocked” that Mattrick decided to go to Zynga, “which has had a rough, rough ride over the past year.”

Zynga, based in San Francisco, has had several rounds of layoffs and closed three offices and several games.

The company’s share price has plunged since its initial public offering on Dec. 16, 2011, when its shares closed at $9.50.

Monday, after news of Mattrick’s appointment as CEO, it closed at $3.07, up 10 percent.

(Microsoft’s shares closed at $34.36, down 0.5 percent.)

“Clearly, Don Mattrick is someone who comes with a big reputation and lot of industry knowledge,” Ward said. “I don’t understand why he would jump from a ship that’s doing well to a ship that’s taking on water.”

In a news release, Zynga’s Pincus said: “Don is unique in the game business. He can execute in multiple domains — hardware, software and network. ... He’s one of the top executives in the overall entertainment business and he’s a great coach who has inspired people to do their best work.”

Track record with Xbox

Xbox One unveiling aside, Mattrick has built a strong track record in the six years he’s been at Microsoft, three of those as head of the Interactive Entertainment division.

In a memo to Microsoft employees, Ballmer credited Mattrick and his team with growing Xbox Live membership from 6 million to 48 million; making the Xbox 360 the top-selling console in North America; introducing and driving the sales of more than 24 million Kinect sensors; releasing “fantastic” games; and expanding Xbox beyond gaming and into movies, music and sports.

“This is a great opportunity for Don, and I wish him success,” Ballmer said in the email.

Ballmer said that employees who had been reporting directly to Mattrick will now report directly to Ballmer and “will continue to drive the day-to-day business as a team, particularly focused on shipping Xbox One this holiday.”

Exec changes

Mattrick is the second president of one of Microsoft’s divisions to leave in the past year.

Windows President Steven Sinofsky left abruptly in November, barely two weeks after the launch of Windows 8.

Ballmer named Julie Larson-Green and Tami Reller as coleads of Windows, but neither has been named president. Larson-Green is a corporate vice president, while Reller is chief marketing officer and chief financial officer for Windows.

Windows Phone division has been without a president since December 2011, when Andy Lees, then the division president, stepped down to fill a role “driving maximum impact” with Windows Phone and Windows 8.

Corporate Vice President Terry Myerson was appointed to replace Lees as head of Windows Phone.

(Lees subsequently was named a corporate vice president in charge of corporate strategy and development. He is currently on sabbatical in the United Kingdom and will be named to a new position when he returns at the end of the summer.)

Other senior leadership changes in the past year include the departure of Chief Financial Officer Peter Klein, replaced by current CFO Amy Hood; and Craig Mundie’s transition from being Microsoft’s chief research and strategy officer to being senior adviser to the CEO. Mundie plans to retire next year. Eric Rudder, Microsoft’s chief technical strategy officer, took over some of Mundie’s duties as chief research officer.

Veteran Microsoft analyst Rick Sherlund, with investment bank Nomura, said he anticipates that any restructuring announcements that Microsoft makes will be “more of a realignment of management than an extensive reorganization.”

Sherlund said it’s unlikely the company will announce sweeping restructuring moves designed to cut costs. Rather, he believes, what’s likely to be announced “seems more of a realignment of resources to better target the devices and services strategy.”

Janet I. Tu: 206-464-2272 or jtu@seattletimes.com. On Twitter @janettu.

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