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Groupon And Zynga Shake Up Executive Ranks Amid Struggles

Mark Lennihan / AP

Two beleaguered tech companies are shaking up their executive ranks, in separate moves that highlight their deep challenges.

Groupon said on Tuesday it had replaced its CEO, Eric Lefkofsky, with Rich Williams, the daily deal company's chief operating officer. At the same time, game maker Zynga said its chief financial officer, David Lee, would resign, to be replaced on an interim basis by Michelle Quejado, its chief accounting officer.

The two announcements, while unrelated, highlighted the struggles of Groupon and Zynga, both onetime darlings of the tech industry. Each has lost steam in recent years, and while neither company is more than 10 years old, financial results they released on Tuesday did little to change the narrative that both are struggling.

Groupon's results showed a mixed picture. The company reported $713.6 million in revenue for the third quarter, roughly flat from the same period a year earlier and a little short of Wall Street expectations of $733 million in revenue. Earnings, adjusted to exclude certain expenses, amounted to 5 cents a share, exceeding analysts' expectations of 2 cents a share. (Without those adjustments, Groupon reported a loss of 4 cents a share.)

Zynga's results were slightly more upbeat, at least when judged against analysts' expectations. The company reported $195.7 million of third-quarter revenue, an 11% increase from the same period a year earlier, and a shade better than analysts' expectations of $188.3 million.

Zynga also exceeded analysts' expectations for profit — but not by actually making one: The company broke even for the quarter, while Wall Street had expected a loss.

Shares of Groupon rose less than 1% in trading after the market closed. Zynga's stock rose around 2% in after-hours trading, bouncing up after an initial decline. Over the last year, shares in both companies have languished. Both are trading at valuations significantly lower than when they each went public in late 2011.

Each company is facing its own set of challenges.

Groupon has been fighting a long battle to revive excitement around daily deals, a trend that seems to be fizzling. Fundamentally, the company simply struggles to attract more customers, a point Williams acknowledged in a statement on Tuesday.

The appointment of Williams is Groupon's second major CEO change in the last three years. In early 2013, the company fired co-founder Andrew Mason from his CEO job, replacing him with Lefkofsky. After the latest change, Lefkofsky will be chair of the board.

Zynga, similarly, needs to get more people playing its games. While the company rocketed to prominence with FarmVille, it hasn't had as much success with other titles, and its financial results have suffered.

Zynga said it had 75 million monthly active users in the third quarter, a 27% decline from the period a year earlier.

For its popular Words With Friends game, Zynga boasted that it was able to get customers to spend more money within the game, despite a decline in the number of players.

Lee, the outgoing finance chief, is stepping down immediately but will stay with the company until Dec. 11, Zynga said. The company also announced it would spend up to $200 million to buy back its stock, helping support the share price.