Analyst: Riccitiello Appointment Positive For EA

As Electronic Arts faces near-term challenges on the rising cost of development, Lazard Capital Markets' Colin Sebastian says the newly announced return of John Riccitiello to Electronic Arts as CEO will be a positive one for the company. As revealed in a surprise announcement after market close on Monday, Larry Probst has stepped down as CEO of Electronic Arts, with former EA president and COO Riccitiello returning to fill the role as of April 2nd. Probst will continue on as executive chairman of the board of directors. "Overall, we view the appointment as a positive," writes Sebastian in his latest investor notes, "given Mr. Riccitiello’s tenure in the video game business, familiarity with Electronic Arts, and prior CEO-level experience." "While it is too early to judge what impact there will be on the company (and the executive ranks) as a result of the appointment, we believe Mr. Riccitiello is well respected within the company and the industry," he said, adding, "With the video game industry now emerging from the console transition period, we believe the timing is appropriate for CEO succession at Electronic Arts." Despite the strong performance of the company over the holiday quarter, which saw record revenues of $1.281 billion, Sebastian also wrote that EA faces some challenges over the coming year. Not only does the company face industry-wide "near-term market issues related to the console transition period and new console launches," said Sebastian, but, more importantly, "the rising cost of video-game development and trends in software ASPs," or average selling price, will be hurdles for EA to overcome throughout 2007.