The first and biggest mistake of John Riccitiello's tenure as CEO at Electronic Arts was underestimating how deeply the rot had set in at the company, according to analyst Doug Creutz.
In a note to investors following the announcement that Riccitiello is stepping down from the beleaguered company, Creutz noted that although the CEO's term was marred by a flawed strategy to turn the business around, he leaves the company in a much better state than when he re-joined the business in 2007.
"The first half of Riccitiello's term was marked by flawed strategy while the latter half was impacted by spotty execution"
Doug Creutz, Cowen and Company
"Riccitiello's first and biggest mistake was underestimating how deeply the rot had set in at EA when he assumed leadership; we do not believe his successor will face a similar problem," Doug Creutz wrote in a note to investors.
"Riccitiello's reign has often been a difficult one for the company; shareholders have seen EA's stock lose more than half its value since he became CEO in 2007. The company has missed earnings guidance on a semi-regular basis and ceded market leadership to Activision Blizzard. We think the first half of Riccitiello's term was marked by flawed strategy while the latter half was impacted by spotty execution.
That first years of Riccitiello's years at EA included expensive acquisitions, too many games in production and time wasted chasing the Nintendo Wii, followed by a failed reboot of the Medal of Honor franchise and most recently a shambolic launch of SimCity.
But there are highlights to Riccitiello's reign that leave the company in a strong position compared to other big box publishers - the growth of digital retailer Origin, solid franchises like Battlefield and mobile success with titles such as The Simpsons: Tapped Out and Real Racing.
"We do think Riccitiello is leaving the company better positioned than it was when he became CEO (and certainly in much better shape than it was 4-5 years ago)," wrote Creutz.
"The company's core line-up is now focused down to a manageable amount of solid franchises, buttressed by increasingly successful downloadable content offerings, while the company's mobile business is number one in the US and appears to be gaining meaningful momentum."
Electronic Arts now presents an interesting investment case, according to the analyst, focused on the ongoing transition to a digital games business, the growth of mobile and the boost to core gaming with new consoles.
And while the company now looks to a replacement for John Riccitiello, it has good form based on last year's hire of Blake Jorgensen as chief financial officer.