Last year, Zynga hired Electronic Arts’ COO John Schappert, who now holds the same title at the social games company. It also picked up EA Play’s EVP Jeff Karp, who is now Chief Marketing and Revenue Officer.

Most recently, Cottle was overseeing EA Mobile, Playfish, Pogo, Hasbro and PopCap, and had been one of the key driving forces behind transforming the company from primarily a packaged goods company to a digital company.

At Zynga, Cottle will serve as EVP of business and corporate development in charge of new global partnerships, acquisitions and other development roles.

In a letter sent to employees today, Electronic Arts CEO John Riccitiello downplayed the departure of Cottle, and said it was going to fold EA Interactive into the entire organization now that “everyone and everything is digital.”

Four years ago, when it originally set up EA Interactive, it was to oversee mobile, social and Pogo, he explained. But today, those initiatives are part of every group within the company.

“It’s abundantly clear that the digital transformation is not confined to one group,” he wrote. “Therefore, we have decided to begin 2012 by folding EAi into the organizations noted below. This reflects our new reality: everyone and everything is digital.”

Executives now leading the charge include EA Labels President Frank Gibeau, COO Peter Moore, CTO Rajat Taneja and EVP of digital Kristian Segerstrale.

Riccitiello provided further evidence of EA’s digital transformation by announcing that the company had achieved more than $1 billion in digital revenues in 2011.

The loss of another high-profile executive to Zynga represents a signficant blow to the company, which has been clear about its attempt to challenge Zynga’s dominance in social gaming. Last year, it paid $750 million to acquire PopCap to become the second-largest social game maker on Facebook.

Cottle, who was at EA for the past five years, previously worked at Palm, where he held the position of COO, and at the Walt Disney Company, where he was he was an SVP and chief marketing officer.

“It’s rare that you find someone who possesses a deep operational background and also has the vision to see where your business and your industry are headed,” said Zynga’s CEO Mark Pincus in a release. “His skill set, combined with his deep understanding of the games, technology and entertainment spaces will help us accelerate our mission of connecting the world through games.”

So, why didn’t it win the hit-driven games company?

That’s a very good question.

Yesterday, Electronic Arts announced it purchased PopCap for $650 million in cash and $100 million in stock. The deal could soar to as much as $1.3 billion if PopCap hits some very aggressive revenue goals.

But, according to one source, Zynga’s offer exceeded that, and was worth $1 billion in cash. Another source added that EA’s offer only appeared greater because more cash was delivered upfront, although both bids were similar in nature over the long term.

A Zynga spokeswoman — as the company usually does on even the most minor and mundane of queries — declined to comment about its involvement in the PopCap bidding.

But, as of March 2011, according to documents it filed related to its IPO, Zynga had nearly $1 billion in cash and is expected to raise up to $1 billion in its public offering.

With all that money, as well as its own stock, Zynga clearly could have come up with sufficient funds to purchase PopCap, which is known for such games as Bejeweled, Plants vs. Zombies and Peggle.

And, bidding that much seems to make some sense, too.

That’s because PopCap would have given Zynga the scale and scope that it is looking for on other platforms, as well as a strong revenue stream, profits, a dominant headquarters in Seattle, which it has been looking for, and even a position in Asia, where Zynga has struggled and PopCap has been doing well.

More importantly, as it seeks an IPO, one of Zynga’s biggest risk factors is its dependence on Facebook, which takes a 30 percent cut of its revenues.

PopCap would have given Zynga some of the distribution diversity it needs, with its games installed and played more than 150 million times on a diverse range of non-Facebook platforms, including RenRen, Google, iPhone, iPad and Android. In 2010, about 80 percent of PopCap’s revenues came from these platforms.

It is no wonder, then, that Zynga was interested. The bidding represented its most ambitious yet, sources said.

In fact, the failure of Zynga to purchase PopCap calls into question why the San Francisco company, which is the darling of Wall Street and the largest social games company, has only scooped up small studios around the world and hasn’t land something as prominent as PopCap.

Just five days ago, in fact, Zynga announced the acquisition of the Toronto-based Five Mobile, which was its 15th acquisition in 13 months. Terms of the deal were not disclosed, including the size of the team.

But, like most of its other purchases, it was relatively small.

While Zynga would not talk about that, both EA’s CEO John Riccitiello and PopCap’s CEO Dave Roberts were willing to say that the bidding process was competitive.

Roberts said it was “a fully competitive process that took me by surprise.”

Riccitiello said in recent months PopCap has received bids from other game companies.

“Ultimately, PopCap chose EA. Their leadership team tells us that in the end, the decision swung on their recognition of our culture — the respect that EA shows for games and the teams that create them,” he wrote in a letter to employees.

One source said that there were several offers, some verbal and some via multiple written offers.

But, in the end, EA won, which one source describes as “a game-changer for EA.”

Ricitiello agreed. He told me that in a matter of months that he expects PopCap and EA’s combined traffic on Facebook to hit 20 million monthly users.

While that’s very far from Zynga’s dominant position, he said he wants to get EA within “punching distance.”

It’s still a reach, even with PopCap. That’s why to get to jab at Zynga, Riccitiello was willing to commit more than an eighth of the company’s market cap toward the deal.

So far, Wall Street has reacted negatively to the news. EA’s stock dropped 22 cents after the deal was announced in after-hours trading to close at $24.17. Today, it is now trading at around $23.48 a share.

EA’s CEO John Riccitiello sent a letter to all employees today, explaining that in recent months, PopCap received a lot of offers, including bids from other game companies. Separately, we heard other bidders at the table were likely Zynga, and other companies in Asia looking to expand to the U.S., such as Tencent or Renren. [Update: Learn more about Zynga's $1 billion offer here.]

But ultimately, both leadership teams tell me that the deal closed because of the synergies between the two companies.

A much less serious letter was sent from PopCap to EA, highlighting just a little bit of the company’s personality, which has developed such hit titles as Bejeweled, Plants Vs. Zombies and Peggle. The letter was addressed to the EA humanz, and thanks the company for becoming its new “Zomboss.”

We are happy to service you! We do not mean to serve yr brainz like on a platter, so delishus and cold. That would be a misinterpretashun….We are also very happy yr games do not have plantz. Love, yr new Zombie pals at PopCap.

Despite the kinship being felt between the two companies, investors were not overly thrilled with the deal. EA’s stock dropped 22 cents in after-hours trading to close at $24.17.

The company’s stock performance has been a sore subject for the company. Its market cap is running at around $8 billion, whereas three-year-old Zynga plans to go public shortly to raise $1 billion at a much loftier valuation.

In an interview, Riccitiello’s feelings on the subject were pretty obvious.

“We compete with them [Zynga] in one channel and we crush them everywhere else. We’ve wanted to catch-up and beat them in social.”

Between EA’s Playfish division, which is focused on social, and PopCap, he thinks that they can easily get to 20 million monthly active Facebook players in the next few months. “They [Zynga] are still a lot bigger than we are, but I want to get in punching distance so we can rival them in their space,” he said.

The purchase of PopCap represents a fairly sharp contrast to the picture that Riccitiello was painting only a few months ago, when he said that they were focusing on smaller acquisitions going forward.

But he’s not apologizing for the sudden shift in strategy. ”A bad CEO sticks to a wrong thing,” he said. “I agreed with it at the time, but the opportunity was too great.”

PopCap’s CEO Dave Roberts said the sale to EA is also a dramatic course change for PopCap, which was “steaming down the path” of an IPO. “We knew we’d get some inbound traffic, but it was a fully competitive process that took me by surprise. At the end of the day, we know we can accomplish more with EA than by ourselves. EA does some things really well that we don’t do so well, and we make content that they’ve never tried to make. … It elevates us beyond what we could have done on our own over the next five years.”

PopCap will definitely help EA exceed its goal of hitting $1 billion in digital revenues in fiscal 2012.

PopCap’s games have been installed and played more than 150 million times on platforms such as Facebook, RenRen, Google, iPhone, iPad and Android. In calendar year 2010, about 80 percent of PopCap’s revenue was on high-growth digital platforms.

PopCap’s revenues grew 30 percent in 2010 compared to the year earlier, and in the first quarter revenues jumped by 40 percent. Riccitiello said what’s really interesting about the company’s performance is that PopCap’s margins are expanding much faster than their revenues because of their performance on Facebook and iOS.

Riccitiello said about a quarter of the total industry revenue for games comes from mobile, social, tablet and casual PC games today, and that he expects that to rise to 50 percent or more in the coming five years.

In those terms, how can EA afford not to go big?

Jay Hoag, the founding general partner of Technology Crossover Partners, which is an institutional investor in EA, tells us that the acquisition makes a lot of sense. Just like with Netflix — which he has also been an investor in for many years — sometimes the value is not readily apparent.

“I like the company [PopCap] a lot. EA has made substantial progress on console and digital, and this only enhances their muscles in the digital world, especially social and mobile, which is seeing some pretty impressive growth.”