At least one industry analyst is incensed over Electronic Arts’ decision to close down Pandemic Studios, saying CEO John Riccitiello should consider resigning over the debacle.
EA’s announced its decision to close Pandemic Studios, laying off 200 employees in the process, earlier this week, barely two years after the studio was acquired. But Perry H. Rod of Market Rap is calling shenanigans, suggesting that Riccitiello made a ton of money on the deal and may have helped line the pockets of his former partners while EA shareholders are paying for it through stock value that has declined drastically since the acquisition took place.
EA announced its purchase of VG Holdings Corp., the parent company of both Pandemic and BioWare, in late 2007. The blockbuster deal saw the publisher pay private equity firm Elevation Partners over $800 million for the two studios, an “astronomical” price, according to Rod, when compared to similar deals made by Take Two, which purchased BioShock developer Irrational Games that same year for $11 million and Civilization studio Firaxis in 2006 for $27 million. Particularly troubling for Rod is the fact that Riccitiello was one of the founders of Elevation and made the deal only eight months after returning to EA to assume the role of chief executive.
“It would be a sad statement for shareholder activism and shareholder rights if Mr. Riccitello were to continue his tenure as CEO of Electronic Arts without a challenge. If a high profile chief executive essentially buys his own company, a deal like that should be put to the highest of standards. These results are the lowest of lows,” Rod wrote. “There has not been a single developer in the video game industry that has been purchased for anywhere near this deal’s 840 million dollar price tag, but the fact that it blew up in this way only two years later is what is especially outrageous. Mr. Riccitello ought to consider resigning his position for committing such a blatant act of self serving greed at the expense of EA’s shareholders.”
Ironically, his complaint comes on the same day that a NeoGAF user claiming to be a former Pandemic employee said the decision to close the studio was probably the right one. “Pandemic cost a lot to upkeep and, quite frankly, the last few products weren’t up to snuff,” he wrote. He also noted that “it probably doesn’t look good for JR considering he made a cool 5 mil off of the sale of Pandemic/Bioware.”