EA Wants New Blood to Turn Its Ship Around


Electronic Arts Inc. (NASDAQ: EA) is going to see if a new chief executive officer will get its growth fortunes back on track. The video game giant has now confirmed that CEO John Riccitiello will step down effective March 30. He will also lose his position as a member of the Board of Directors. Wall St. so far is glad to see the transition.

This is a move which signals that business remains challenged, and its implied guidance also confirms that. The EA board of directors has appointed Larry Probst as EA's executive chairman while it looks for a permanent CEO. EA has signaled that it will consider internal and external candidates and will also hire a leading executive search firm.

The company's quote included, "We have mutually agreed that this is the right time for a leadership transition." That might not be a firing and the departure might not be on bad terms. The flip-side is that this confirms that the company knows it will take new blood to drive initiatives in whatever form they are going to take on.

We noted that the implication is for more weakness. EA signaled that revenues and earnings for the current quarter will be at the low-end of expectations or will even fall slightly below its previously issued guidance.

Still, the stock is up on news that new blood will bring new direction for the company. EA shares closed down 0.9% at $18.71 on the day against a 52-week range of $10.77 to $19.51. Being that close to a 52-week high is very misleading. EA shares were peaking at almost $25 in 2011 and its stock was north of $50 back before the recession took hold.

EA shares are up over 3% at $19.31. A CEO has to feel bad when issuing an earnings and sales warning but thew stock rises because a new unnamed CEO will get to change things.

New blood is what this company needs. The question which remains to be answered is whether or not EA has waited too long to bring in new blood. Hopefully it doesn't think that an out-of-favor recently fired daily deals CEO in Chicago is the answer.

Filed under: 24/7 Wall St. Wire, Activist Investor, Corporate Governance, Management Change, Media, Video Games Tagged: EA, featured