After the bell yesterday, Motley Fool Stock Advisor recommendation Electronic Arts (NASDAQ:ERTS) announced that President and Chief Operating Officer John Riccitiello has resigned. His ambition is to set up a private equity firm specializing in media investments.
Riccitiello is best known for bringing EA -- by far the largest and most successful video game maker -- closer to the mainstream and closer to Hollywood. Not only is his influence reflected in the pop music now used in video games, it is evident in the complete interactive movie experience characteristic of some of EA's popular titles.
In a press release, EA assured investors that Riccitiello would remain with the company during the transition period. In the meantime, CEO Larry Probst will assume his responsibilities as the company reviews candidates.
While Riccitiello must be credited for a part of EA's success, my sense is that with its experienced management and established competitive advantages, Electronic Arts should be fine without him. After all, EA Sports is not about to be attacked by companies whose strengths are in other genres -- Activision (NASDAQ:ATVI) or Take-Two Interactive Software (NASDAQ:TTWO) spring to mind.
In Companies on the Road to Ruin (free with a trial to Motley Fool Hidden Gems), I discuss seven red flags for new investors, including the sudden departure of a company's CEO or another top executive. As illustrated by Time Warner (NYSE:TWX), Tyco International (NYSE:TYC), and Qwest Communications (NYSE:Q), such an event -- particularly when combined with an SEC investigation -- can spell trouble.
Fortunately, I don't think that's the case here. In fact, Electronic Arts should be just fine, and John Riccitiello should be wished the best.
Take a free trial of Motley Fool Hidden Gems with justone click. Or you can check outMotley Fool Stock Advisor, in which David Gardner recommended Electronic Arts, Activision, and Time Warner, for six months with a money-back guarantee.
Fool contributor Jeff Hwang owns shares of Electronic Arts.
