Electronic Arts CEO Riccitiello steps down, shoulders blame for missteps
Electronic Arts CEO John Riccitiello has resigned after six years at the gaming giant's helm, accepting blame for recent financial missteps that have sent its stock tumbling.
"My decision to leave EA is really all about my accountability for the shortcomings in our financial results this year," Riccitiello said in a resignation letter posted to the EA Website. "It currently looks like we will come in at the low end of, or slightly below, the financial guidance we issued to the Street, and we have fallen short of the internal operating plan we set one year ago. And for that, I am 100 percent accountable."
Riccitiello will exit his post and leave EA's board on March 30, two months after the company reported third-quarter fiscal 2013 net revenues of $922 million, down from $1.06 billion a year ago; net losses narrowed to $45 million, compared with $205 million in the year-ago quarter. "The revenue shortfall was a result primarily of a miss with our Medal of Honor title and stronger-than-expected sector headwinds for console packaged goods," Riccitiello said at that time.
Reuters reports EA's market value has fallen by close to two-thirds since Riccitiello assumed the CEO mantle in April 2007. News of Riccitiello's resignation sent EA stock up nearly 3 percent in after-hours trading.
Larry Probst, EA's chairman and former chief executive, will run the company until a new CEO is found. "The Board will immediately initiate a search and both internal and external candidates will be considered for the CEO position," Probst said.
Mike Hickey, an analyst at National Alliance Capital Markets, told Reuters that Riccitiello's exit did not come as a surprise, stating the CEO has had "a track record of mis-executions." Sterne Agee Analyst Arvind Bhatia added "The stock that has underperformed encapsulates all of the issues. And this most recent quarter was the straw that broke the camel's back."
Despite EA's struggles in the console segment, the company has made significant strides in mobile gaming: Its mobile titles and services, including handhelds, generated approximately $100 million in revenue during the quarter ending Dec. 31, an 18 percent year-over-year increase. The Simpsons: Tapped Out, a freemium Apple (NASDAQ:AAPL) iOS title first introduced in early 2012, generated more than $23 million in revenues during the final three months of last year alone.
"Personally, I think we've never been in a better position as a company," Riccitiello wrote in his farewell letter. "You have made enormous progress in improving product quality. You are now generating more revenue on fewer titles by making EA's games better and bigger. You've navigated a rapidly transforming industry to create a digital business that is now approximately $1.5 billion and growing fast... You are number one in the fastest growing segment, mobile, with incredible games like The Simpsons: Tapped Out, Real Racing 3, Bejeweled, Scrabble and Plants v. Zombies."
Last month, EA shifted the Real Racing franchise from premium to freemium with the launch of the series' third installment, available for iOS and Google's (NASDAQ:GOOG) Android. Nick Earl, general manager of the publisher's All Play label, said freemium is now EA's "default model," explaining "We looked at it closely, and the market was demanding games with this model. It's an opportunity to get it in front of far more people." Real Racing 3 has since topped Apple's Free Apps chart in 90 different countries. According to EA, gamers have spent more than 14 million hours behind the virtual wheel, completing more than 25 million races per day.
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