The first casualty of Zynga's disastrous second-quarter earnings report has been identified, and it's chief operating officer John Schappert. Was it the plummeting stock price, or a recent lawsuit filed against the company that did him in?
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News broke this evening that Schappert was stepping down as COO and as a member of Zynga's board of directors, effective immediately. Schappert took a beating after the second-quarter report was a huge disappointment, and drove the company's stock down. In the aftermath, Bloomberg reported Schappert was stripped of his role overseeing game development in an effort "aimed at reviving growth and making more money from mobile services." David Ko, head of Zynga's mobile operations, and Steve Chiang, executive vice president of games, were ordered to report directly to CEO Mark Pincus. Where did that leave room for Schappert? Well...
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AllthingsD's Tricia Duryee says the move may be Zynga trying "to shore up investor confidence in the company as it scrambles to recover from a disastrous second quarter and 2012 outlook." But, she also notes, it's surprising because Schappert was one of the company's biggest poaches from Electronic Arts. They paid out the nose for him, to the tune of a $10 million dollar signing bonus and a $42.8 million compensation package.
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It's worth noting that Zynga and Electronic Arts are fighting, and Schappert's name is in the middle of the conflict. EA filed a lawsuit last week alleging their Sims Social game, a Facebook version of the popular Sims franchise, was ripped off by Zynga's The Ville. As Business Insider's Matt Lynley noted, the lawsuit directly mentions Schappert. EA's mobile games division reported directly to him while he was the COO of EA. He "had detailed, internal strategic plans and development information related to EA's efforts The Sims franchise to Facebook," the lawsuit alleges.
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All in all, it hasn't been a good two weeks for Schappert. Internally he lost a huge chuck of his responsibility, and immediately after that he was named in a lawsuit from his former employer. It seems as if he had no where to go but out.
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Zynga is still suffering, though. Their stock price went all the way down to $2.95 at close today, and Schappert's departure hasn't done it any favors in after hours trading. It's down another $0.05 right now. Here's Zynga's six month stock chart, just for kicks: