CEO Resignation Will Not Derail Game Publisher’s Turnaround: Electronic Arts Inc. (EA), Activision Blizzard, Inc. (ATVI)

Electronic Arts Inc. (NASDAQ:EA) announced that John Riccitiello will step down as Chief Executive Officer on March 30. Larry Probst, the former CEO who was replaced by Riccitiello in 2007, will become interim CEO as the company searches for a permanent replacement.

Although the game publisher’s stock is up in after-hours trading due to the announcement of Riccitiello’s resignation, the departing CEO’s contributions to the company’s turnaround have been enormous.

After taking over the reins in 2007, Riccitiello led the transition from a bloated company that lacked focus to a business focused on its keys to profitability. Namely, the company stopped development on many non-core games and shifted its focus to its hit franchises. Although no longer the growth engines they once were, EA’s Madden franchise and other top games have been key to the company’s profitability over the years. The company became unprofitable when it lost focus on its core revenue drivers and has recovered since resuming focus on its blockbusters.

The New EA is Set to Thrive

With a new set of consoles slated for release in the 2013 holiday season, game publishers will receive a much-needed tailwind from consumers looking to buy the latest games for the new consoles. Electronic Arts’ renewed focus on its key titles affords it significant operating leverage that should boost profitability in the years ahead.

In addition, Electronic Arts Inc. (NASDAQ:EA) is quickly becoming a leader in mobile gaming. The nascent mobile gaming market is gaining steam among casual gamers — a group that Electronic Arts has traditionally failed to court.

However, mobile gaming is unlikely to carry the company into the future. Electronic Arts will ultimately need to develop another blockbuster console-based series in order to provide additional value for shareholders.