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Posts Tagged ‘NTES’

Activision Blizzard (ATVI) update #17—Finally! China approves “Wrath of the Lich King”

Posted by intelledgement on Wed, 11 Aug 10

Citing a Wall Street Journal story, the leading World of Warcraft (WoW) fansite, WoW Insider, reported yesterday that the “Wrath of the Lich King” expansion module will finally be made available in China by Activision’s (ATVI) licensee, NetEase (NTES) next week. Wrath of the Lich King is the second expansion module to be released for WoW following “The Burning Crusade,” and sold an all-time computer game record 2.7 million copies within the first 24 hours of its release in November 2008 in the USA and Europe. Worldwide, there are in excess of 11 million active WoW players.

The process of gaining approval in China has been arduous and protracted, replete with dueling bureaucracies and—in the midst of everything else—Activision firing their original Chinese WoW licensee and switching to NetEase. Many mainland Chinese players had reportedly been logging on to Taiwan-based servers, where the Wrath of the Lich King has been installed for over a year. No word on whether NetEase will make it possible to port characters developed on Taiwanese WoW servers back to the mainland (otherwise, mainland players who want to switch back to NetEase servers—which would presumably be cheaper and less likely to suffer network issues—would have to start over with new characters).

No official announcement yet from Activision, but if confirmed, this news appears to obviate the embarrassing prospect of the third WoW expansion module—Cataclysm, currently in beta testing—being released in the West before Wrath of the Lich King was available in China.

Previous ATVI-related posts:

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Activision Blizzard (ATVI) update #16—2Q10 results beat guidance but disappoint investors

Posted by intelledgement on Fri, 06 Aug 10

Our game publishing company, Activision Blizzard (ATVI), announced 2Q10 results yesterday that exceeded management’s guidance from three months ago, but failed to impress The Street…and the stock is trading sharply lower today, currently down over 6%. The guidance had called for revenues of $925 million and a profit of eleven cents per share in the quarter and the actual results included revenues of $967 million and a profit of 17 cents per share. While exceeding the guidance, the revenue results did fall short of what was achieved a year ago (1.038 billion).

CEO Bobby Kotick stated, “Our quarterly results were fueled by continued strong consumer response to Activision Publishing’s ‘Call of Duty’ franchise and Blizzard Entertainment’s ‘World of Warcraft.’ For the first and second quarters, we outperformed our earnings per share outlook, and we grew our operating margin year over year for the six month period, driven by our focused effort to increase digital revenues…. Looking to the balance of the year, we expect to release the best slate in our company’s history. Blizzard Entertainment’s ‘StarCraft II: Wings of Liberty’ is off to a strong start worldwide with midnight openings on July 27, 2010 at 3,100 GameStop stores in the U.S. and 8,000 retailers around the world. We are, of course, enthusiastic about Blizzard Entertainment’s upcoming release of ‘World of Warcraft: Cataclysm,’ which began a closed beta test on June 30. ‘Call of Duty: Black Ops’ is shaping up to be one of the best games Activision Publishing has ever created, the marketing programs are the biggest in the company’s history and to date, pre-orders of the game exceed the pre-orders for Modern Warfare 2 at this time last year. This fall, our lineup includes Activision Publishing’s ‘Guitar Hero: Warriors of Rock,’ ‘DJ Hero 2,’ ‘Tony Hawk: SHRED,’ ‘Spider-Man: Shattered Dimensions,’ ‘GoldenEye 007,’ and ‘Bakugan,’ all of which look to be very promising as well. We have never been better positioned for the holiday season than we are today with such a strong slate of games and the best team in our industry to bring them to market.”

Management also announced that as of 30 June the company had purchased $334 million—approximately 3.1 million shares—of common stock under the $1 billion stock purchase program announced in February. Also, during the second quarter revenue from digital online channels grew more than 20% year-over-year. Guidance for 2010 still calls for revenues of $4.2 billion including $600 million in 3Q10 and 49¢/share of earnings including 0¢ (breakeven) in 3Q10.

Second quarter highlights included:

  • For the first six months of 2010, “Call of Duty: Modern Warfare 2” was the #1 first-person shooter game in the USA and Europe
  • For the first six months of 2010, “Call of Duty” was the #1 third-party franchise in the USA and Europe
  • For the first six months of 2010, Activision Publishing was the #2 third-party console and handheld publisher in the USA
  • For the quarter, “Call of Duty” was the #3 franchise overall and the #1 first-person shooter franchise in the USA
  • For the quarter, “Call of Duty: Modern Warfare 2” was the #1 first-person shooter title in the USA
  • For the quarter, Activision Blizzard had four top-10 PC games—Activision Publishing’s “Call of Duty: Modern Warfare 2” and Blizzard Entertainment’s “World of Warcraft: Wrath of the Lich King,” “World of Warcraft Battle Chest,” and “Diablo Battle Chest” in the USA
  • 19 May—“Shrek Forever After” released
  • 25 May—“Blur” released
  • 14 June—Activision Publishing extends deal with Microsoft (MSFT) to release new “Call of Duty” releases first on Xbox LIVE through 2012
  • 22 June—“Transformers: War for Cybertron” released
  • 24 June—“Wipeout: The Game” released
  • 29 June—“Singularity” released
  • 30 June—“World of Warcraft: Cataclysm” beta testing initiated

Things seem relatively calm in China, although Netease (NTES), Blizzard’s partner who runs the “World of Warcraft” (WoW) subscription business there—and will run “Starcraft” if that game ever gets approved—had a bad quarter. Still no word on the oft-delayed “Wrath of the Lich King” expansion, which Chinese WoW players have been awaiting—excepting those who have “defected” to Taiwan-based servers—for 21 months now. It would be embarrassing if the “Cataclysm” WoW expansion is released in the West before the “Wrath of the Lich King” is available in China.

Speaking of Blizzard, they did manage to cause a stir last month with an announcement that all posters on their gaming forums—which are quite lively—would henceforth be forced to sign their posts with their real names, instead of their game-playing screen name pseudonyms, as has always been the case heretofore. The intent was to constrain the activity of so-called “troll” posters, who lurk on message boards and are quick to castigate other posters for no discernible reason other than to gain attention or cure boredom. The idea was that if the trolls had to ascribe the real names to their noxious messages, they would cease and desist, and the forums would be more civil and more pleasant for everyone else. Unfortunately, it turns out it was not only the trolls who objected to losing the cloak of anonymity. According to a CNBC report, “Others…were more worried that anything they wrote on those message boards could be easily found with a Google search—and an off-the-cuff comment made online could have repercussions for them in real-world relationships…. Still others were concerned that with access to their real name, other players could dig up additional information about them, including photos, addresses, phone numbers and more. Some female players said they feared harassment.”

After three days of increasingly bad PR, Blizzard management recanted, apologized, and scrapped the change.

In 3Q10, three games are expected to be released: “StarCraft II: Wings of Liberty,” which was published 27 July, “Guitar Hero: Warriors of Rock” for the Xbox 360, the PLAYSTATION3, and the Wii, and “Spider-Man: Shattered Dimensions” for the Xbox 360, the PLAYSTATION3, the Wii, and the Nintendo DS.

Previous ATVI-related posts:

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Activision Blizzard (ATVI) update #14—1Q10 results surge on early Call of Duty release

Posted by intelledgement on Fri, 07 May 10

Our game publishing company, Activision Blizzard (ATVI), announced 1Q10 results yesterday that materially exceeded management’s guidance from three months ago. The guidance had called for revenues of $1.1 billion and a profit of twenty cents per share in the quarter and the actual results included revenues of $1.3 billion and a profit of 30  cents per share. The good news was tempered, however, by the realization that the bounty was largely attributable to the early release of a “Modern Warfare 2” expansion kit that had not been expected until the second quarter…and ergo the boost from which shall now be missing in 2Q10. And the beat was not a surprize, as management had preannounced it last month.

CEO Bobby Kotick stated, “Our better-than-expected first quarter performance was driven by strong global consumer demand for Activision’s ‘Call of Duty’ and Blizzard Entertainment’s ‘World of Warcraft’. Activision’s ‘Call of Duty: Modern Warfare 2’ was the #1 title overall in the U.S. and Europe for the quarter, which illustrates the continued momentum of our catalogue. Additionally, during the quarter, Activision launched DreamWorks’ ‘How To Train Your Dragon’ and the ’Call of Duty: Modern Warfare 2 Stimulus Package,’ which shattered Xbox LIVE records with more than one million packages downloaded in the first 24 hours…. We expect to deliver record calendar year non-GAAP net earnings and expanded non-GAAP operating margins. In addition, we continue to strengthen our franchise portfolio and development resources for the future. Our high-quality brands, industry leading operational capabilities and solid balance sheet should enable us to take full advantage of the opportunities afforded by the expanding interactive entertainment market and allow us to deliver continued superior returns to our shareholders. As of March 31, 2010, we have delivered compound shareholder returns of 28% compared to the S&P average of -2 % over a ten-year period. We continue to find ways to add profitable franchises that allow us to increase our operating margins. In this regard we recently announced a ten-year alliance with Bungie, one of the premier studios in our industry. This relationship will allow Activision to broaden its product portfolio with exciting new games and underscores our commitment to partnering with the best creative talent in the industry.”

Management also announced that as of 31 March the company had purchased $92 million—approximately 8.5 million shares—of common stock at an average price of $10.84 per share under the $1 billion stock purchase program announced in February. Guidance for 2010 still calls for revenues of $4.2 billion including $925 million in 2Q10 and 49¢/share of earnings (up from the previously projected 47¢) including 11¢ in 2Q10.

First quarter highlights included:

  • In the quarter, “Call of Duty: Modern Warfare 2” became the #1 best-selling third-party video game of all time
  • For the quarter, “Call of Duty” was the #1 third-party franchise in the USA and Europe
  • For the quarter, “Band Hero” and “Cabela’s Big Game Hunter 2010” were top-10 titles on the Nintendo Wii in the USA
  • For the quarter, “Call of Duty: Modern Warfare 2” and “World of Warcraft: Wrath of the Lich King” were top-10 PC titles in the USA
  • 10 February—stock repurchase program announced under which the company can repurchase up to $1 billion of ATVI shares
  • 11 February—Percy Jackson & The Olympians: The Lightning Thief released
  • 2 March—Activision Publishing announced the firing of Infinity Ward co-founders Jason West and Vince Zampella and the formation of a new business unit dedicated to the “Call of Duty” franchise headed by Philip Earl with the missions of expanding the brand to new geographies and devising “new margin expanding digital business models.”
  • 23 March—Zhu Zhu Pets released
  • 23 March—How to Train Your Dragon released
  • 30 March—Cabela’s Monster Buck Hunter released
  • 30 March—Call of Duty: Modern Warfare 2 Stimulus Package released

In China, the good news finally panned out as on 12 February, Blizzard licensee Netease received permission from the General Administration of Press and Publications (GAPP) to (re)release The Burning Crusade, the first expansion released for World of Warcraft (WoW) back in January 2007. This ends seven months of uncertainty and intermittent interruptions in WoW availability on the mainland, ever since the expiration of Blizzard’s five-year deal with The9, their previous licensee. Still no word on the oft-delayed Wrath of the Lich King expansion, which Chinese WoW players have been awaiting—excepting those who have “defected” to Taiwan-based servers—for 18 months now.

Now that the China WoW contretemps winding down, we will have to content ourselves with the Infinity Ward legal warfare drama. That heated up late last month as 38 additional Infinity Ward employees sued Activision over alleged delinquent royalties. They are seeking between $75 and $125 million plus $500 million in punitive damages. This is in addition to the $36 million in royalties sought by fired Infinity Ward co-founders West and Zampella in their suit filed in March. It is unclear how many of the 38 employees involved in the second suit have left Activision, but clearly there are some morale issues in the “Call of Duty” business unit, to say the least.

In 2Q10, four games are expected to be released: the new racing title “Blur,” “Shrek Forever After” based on DreamWorks Animation’s upcoming feature film, an original Transformers game, “Transformers: War For Cybertron,” and “Singularity.” Also, in the last ten days the company announced release dates for “Starcraft II” (27 July and separately, as of 28 April the Mac beta was released and Intelledgement staff are expecting to install it imminently) and “Call of Duty: Black Ops” (30 November).

Previous ATVI-related posts:

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Activision Blizzard (ATVI) update #10—4Q09 results beat old guidance; new guidance so-so

Posted by intelledgement on Wed, 10 Feb 10

Our game publishing company, Activision Blizzard (ATVI), announced 4Q09 results today that generally matched management’s guidance. The guidance had called for revenues of $1.33 billion and a loss of four cents per share in the quarter and the actual results included revenues of $1.56 billion and a loss of 23 cents per share including a 19-cent reduction in the valuation of intangible assets reflecting the impact of a weaker market on the casual and music genres…exclusive of that non-cash charge, the loss would have been four cents per share. For the full year, the company had revenues of $4.28 billion and earnings of nine cents per share including the 19-cent charge (28 cents/share excluding the charge) as compared with guidance of $4.05 billion and earnings of 26 cents per share.

CEO Bobby Kotick stated, “We generated approximately $1.2 billion in operating cash flow and ended the year with approximately $3.3 billion in cash and investments. For the calendar year, in the U.S. and Europe, Call of Duty: Modern Warfare 2 was the #1 best-selling title overall and DJ Hero was the highest grossing new IP launched in 2009. Additionally, through Blizzard Entertainment’s World of Warcraft we remain #1 in the subscription-based massively multiplayer online role-playing game category worldwide…. Despite these challenging times, in 2010 we remain focused on expanding operating margins by growing our high-margin digital/online revenues, directing our resources to the largest and most profitable opportunities and realizing operational efficiencies globally. On a non-GAAP basis, we expect to deliver a year of record net earnings and operating margins and are taking another step towards our long-term objective of operating margins of 30% or more. In calendar year 2010, we expect our net earnings and operating margin growth will be driven by our product slate that includes Blizzard Entertainment’s Starcraft II and the World of Warcraft expansion pack, Cataclysm, as well as a diversified lineup based on Activision Publishing’s best-selling franchises including Call of Duty, Guitar Hero and Tony Hawk, together with other well-known titles such as True Crime, Spider-Man, and Bakugan.”

Management also announced a fresh $1 billion worth of share buybacks—the $1.25 billion program initiated in 2008 (originally as $1 billion and subsequently enhanced) was completed during 4Q09 with 115 million shares of common stock purchased at an average price of $10.87—as well as the first dividend in company in company history: 15¢/share payable to shareholders of record on 22 February. This amounts to a 1.5% payout based on today’s close of $9.96; they plan to pay an annual dividend going forward. Guidance for 2010 calls for revenues of $4.2 billion—$1.1 of that in 1Q10—and 47¢/share of earnings (20¢ in 1Q010)…basically flat revenues with improved profitability.

Fourth quarter highlights included:

  • For 2009, an overall 16% market share in the U.S. and Europe, an increase of 1.8 points
  • For 2009, two of the top-five best-selling franchises on the consoles across all platforms in the U.S. and Europe: Call of Duty and Guitar Hero
  • For 2009, #1 U.S. publisher overall for the PlayStation® 3 computer entertainment system from Sony (SNE) and the Xbox 360™ video game system from Microsoft (MSFT) and the #1 third-party publisher for the Nintendo Wii™
  • For 2009, highest share point gain of any publisher in Europe from 11.9% to 13.9%
  • For 2009, Guitar Hero was a top-four franchise overall and the #1 music franchise in the U.S. and Europe
  • For 2009, highest grossing new intellectual property launched in 2009 in the U.S. and Europe: DJ Hero
  • For 2009, two of the top five best-selling PC titles in dollars in the U.S. and Europe: Call of Duty: Modern Warfare 2 and World of Warcraft: Wrath of the Lich King
  • For 4Q09, 20.1% market share across all platforms in the U.S. and Europe—up 1.7 points over 4Q08—and #1 publisher overall
  • For 4Q09, Call of Duty: Modern Warfare 2 was the #1 best-selling console title in dollars and the Call of Duty franchise was the #1 franchise overall in the U.S. and Europe
  • 20 October—Bakugan Battle Brawlers video game, licensed by Corus Entertainment Inc.’s (CJR’s) Nelvana and based on the top-rated television series and Spin Master’s best-selling toy, was released for Nintendo DS, the Wii, the Xbox 360, and the PlayStation(R)3 and PlayStation(R)2
  • 26 October—Guitar Hero became the first game to surpass a million fans on Facebook
  • 27 October—DJ Hero released
  • 3 November—Band Hero released
  • 10 November—Call of Duty: Modern Warfare 2 released; on 15 November, it became the first video game ever to surpass $550 million in retail sales in its first five days of release and the game has sold more than $1 billion in retail sales worldwide to date
  • 17 November—Tony Hawk: RIDE released featuring a skateboard controller
  • 14 December—A new open world True Crime game inspired by classic Hollywood and Asian cinema-style action thrillers announced to be released in 2010

In China, WoW operations are semi-suspended again, but this time it appears to be good news. Months of wrangling between the Ministry of Culture and the General Administration of Press and Publications (GAPP) have evidently yielded an agreement whereby Blizzard’s WoW licensee NetEase (NTES) submitted an application to the GAPP for the approval of The Burning Crusade, the first expansion released for WoW back in January 2007. This is consistent with the Ministry of Culture’s position that the GAPP has jurisdiction only over packaged software “publications,” and not changes to online games. Nevermind that The Burning Crusade was released in China by Blizzard’s previous licensee, The9 (NCTY), back in September 2007 and the GAPP did not raise any objection at that time, or anytime since…until mid-2009. The agreement calls for NetEase to suspend new registrations for a week starting 8 February, during which time WoW servers will remain active and players will be allowed three hour/day of free access; presumably the GAPP approval will be forthcoming at that point. No word yet on the oft-delayed Wrath of the Lich King expansion, which Chinese WoW players have been awaiting—excepting those who have “defected” to Taiwan-based servers—for 15 months now. Overall, as of 31 Dcember 2009, there are approximately 11.5 million WoW subscribers worldwide, according to Blizzard.

In 1Q10, one Activision Blizzard title is scheduled for release: How To Train Your Dragon, which is based on DreamWorks Animation’s (DWA’s) upcoming 3D movie. The game will be published for the PlayStation 3, Xbox 360, Nintendo Wii, and Nintendo DS.

Previous ATVI-related posts:

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Activision Blizzard (ATVI) update #9—2009 bad sales year for gaming companies

Posted by intelledgement on Tue, 15 Dec 09

With two weeks to go until the end of the year, 2009 is shaping up as a seriously down year for the gaming industry, sales-wise. Through November, sales in eight of the last nine months were worse than in 2008, and with Wal-Mart (WMT) aggressively cutting hardware and software prices going into this holiday season, it is doubtful December will be a whole lot better. Activision Blizzard (ATVI) partner NetEase (NTES) reported underwhelming 3Q09 results last month, and while World of Warcraft (WoW) is now up and running in China, there is no word yet on how many of the four million subscribers The9 (NCTY) had have survived the rocky migration (which included months of WoW being offline).It doesn’t look much better for the hardware makers, and retailer GameStop (GME) could be seriously arrested by a games price war.

Still-in-all, the game publishers in general—and our ATVI in particular—have held up pretty well in 2009, stock-price-wise, at least compared with 2008, which was a genuine disaster:

2006 2007 2008 2009 Overall since 2005
Activision Blizzard ATVI 25% 72% -39% 21% 61%
Electronic Arts ERTS -4% 16% -70% -4% -68%
Konami KNM 37% 8% -19% -36% -23%
Take Two Interactive TTWO 0% 4% -57% 13% -49%

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Activision Blizzard (ATVI) update #8—Chinese bureaucrats in WoW fight

Posted by intelledgement on Sun, 08 Nov 09

Some light was shed last week on the long-standing delays suffered by licensees of our game publishing company, Activision Blizzard (ATVI) in China with respect to obtaining approval for their massively multiplayer online role-playing game (MMORPG), World of Warcraft (WoW) and various expansions thereto. Apparently, the delays cannot be ascribed to foot dragging on the part of the former licensee, The9 (TCTY), who were canned by Blizzard earlier this year, nor are they reflections of political or trade issues between the USA and China, as some have speculated. According to an article in Friday’s New York Times, the problems stem from a dispute between two Chinese government agencies over who has regulatory control of the huge Chinese online gaming market.

WoW is one of the top ten games MMORPG in China—an estimated 50 million mainlanders are active MMORPG participants—and the only one not published by an Asian-based gaming company (two others are South Korean and the rest are Chinese). The company provides no breakdown, but of the 11.5 million WoW players worldwide,about 4 million are believed to be mainland Chinese.

The first Chinese government agency that Blizzard dealt with—originally from 2003 through The9 and then since 2008 through their current exclusive licensee, NetEase (NTSE)—is the Ministry of Culture, and they have been reasonably accommodating. But for the last couple of years, the General Administration of Press and Publication (GAPP) has required The9 and now NetEase to gain approval of WoW publications—even requiring NetEase to make changes to things that had been approved for years under The9’s aegis in order to gain the goahead to relaunch the game. After months of delays, NetEase finally got the OK in September, but then on Monday, GAPP demanded that NetEase stop accepting new subscriptions and stop collecting fees on pain of losing their access to the internet.

How this will all get resolved is unclear, but it appears in general as if the GAPP is tasked with approving online games prior to publication and the Ministry of Culture with policing them afterwards, which should be good news for Blizzard. In any event, NetEase servers are still operating as of now, and according to the article, the latest GAPP list of “188 companies that it said were running unlicensed, vulgar or overly violent online games” omits NetEase and WoW.

Stay tuned.

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Activision Blizzard (ATVI) update #7—3Q09 results provide surprize profit

Posted by intelledgement on Thu, 05 Nov 09

A third straight quarter of beating guidance on the top and bottom lines—including a penny/share profit when a loss had been expected—highlighted the 3Q09 results that our game publishing company, Activision Blizzard (ATVI) announced today. Revenues for the quarter amounted to $703 million as compared to guidance of $680 million. The 1¢/share profit handily beat the guidance of a loss of 3¢/share.

CEO Bobby Kotick stated, “Our performance was driven by positive audience response to Activision Publishing’s Guitar Hero 5, Marvel: Ultimate Alliance 2, and the Guitar Hero and Call of Duty franchises, as well as Blizzard Entertainment’s World of Warcraft. Year to date through September 30, the Guitar Hero franchise was the #1 best-selling third-party franchise in North America and Europe. For the month of September, sales of music games in the U.S. increased 72% in dollars year over year, which demonstrates the sustained interest in this new and important game category. During the quarter, we continued to see strong sales for Call of Duty World at War and associated map packs, which year to date have sold more than seven and half million units…. This success is the result of our focus on delivering the highest game quality and the best entertainment experiences possible for our consumers.”

Guidance for the calendar year remains unchanged: revenues of $4.05 billion and 26¢/share. For the fourth quarter, management anticipate revenues of $1.33 billion and a loss of 4¢/share.

Third quarter highlights included:

  • Year-over-year 3Q09 U.S. market share up 3.1 points to 13.3%
  • Year-over-year 3Q09 U.S. and European combined market share up 1.2 points to 12.1%
  • Year-to-date U.S. market share of the music/dance category up 5 points over 2008 to 51%
  • Year-to-date Guitar Hero World Tour #1 best-selling third-party title in North America and in the top ten 3Q09
  • Year-to-date Guitar Hero combined U.S. and European sales for the Xbox 360(TM) and PLAYSTATION(R) 3 increased 20% over 2008
  • 3Q09 Guitar Hero #1 third-party console and handheld franchise in Europe
  • Year-to-date and Call of Duty: World at War #2 best-selling third-party title in North America and in the top ten 3Q09
  • Year-to-date Blizzard Entertainment had three of the top-five bestselling PC games in units in North America and four of the top-10 bestselling PC games in units between North America and Europe combined
  • 18 August—Wolfenstein released
  • 21 August—Cataclysm, the third expansion for WoW, announced at BlizzCon; no release date has been specified by Blizzard but according to company president Mike Morhaime, it is targeted for 2010
  • 1 September—Guitar Hero 5 released
  • 9 September—Cabela’s Outdoor Adventures released, a simulation of big game hunting, freshwater fishing and bird hunting in collaboration with Cabela’s (CAB)
  • 15 September—Marvel: Ultimate Alliance 2 released, a collaboration with Marvel Comics (DIS)
  • 30 September—as of this date, Activision Blizzard had purchased $960 million, or approximately 89 million shares, of common stock at an average price of $10.81, under its stock repurchase program since the program’s inception in November 2008

The news from China continued to be mixed…or maybe “mixed up” would be a better description. Evidently ATVI’s new licensee, NetEase (NTSE), initiated a World of Warcraft (WoW) beta test in mid-July, expecting to be able to effect a full relaunch within a week or two. However, final approval from Chinese authorities was not immediately forthcoming, and after several weeks—keep in mind that back on 7 June, WoW effectively closed down in China when ATVI’s contract with their former WoW licensee, The9 (NCTY) ran out, leaving millions of Chinese WoW games stranded offline—NetEase opened up the free beta to everyone. While expensive, this beat the alternative of having frustrated Chinese WoW “defect” to Taiwanese WoW servers—slow to access from the mainland, and requiring them to start from scratch with a new character—or to another non-Blizzard game altogether. Finally, on 19 September, NetEase relaunched WoW in China, after a hiatus of 15 weeks. And last month, NetEase announced that the long-delayed Wrath of the Lich King update—launched in the rest of the world last November—would be released in China later this month.

But then, just Monday, we received a report that one Chinese agency—the General Administration of Press and Publications (GAPP)—had ordered NetEease to stop collecting subscriptions and signing up new subscribers, accusing them of “illegal” behavior, and threatening to yank the company’s internet access. The GAPP had been reviewing the content of WoW—it is not clear why this review was undertaken, as the content is the same as what had been running in China under The9’s aegis—and possibly there was miscommunication as to whether or not that review had been completed. Or perhaps it is a political thing. Doing business in China is a trial! But never boring…stay tuned.

In 4Q09, ATVI management plan to release:

  • Bakugan Battle Brawlers™
  • Band Hero
  • Call of Duty: Modern Warfare 2
  • DJ Hero
  • Tony Hawk: RIDE

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Activision Blizzard (ATVI) update #6—2Q09 results again exceed expectations

Posted by intelledgement on Wed, 05 Aug 09

Our game publishing company, Activision Blizzard (ATVI), announced 2Q09 results today which topped their guidance and increased their FY2009 profit estimates. The company also expanded their share buyback program 25% to $1.25 billion. Revenues for 2Q09 were $1.038 billion as compared to previous guidance of $1 billion and profits amounted to 15¢/share, 50% above the previous guidance of 10¢/share. The results—which were released after the close of the market today—set off a brisk after-hours rally in the stock price, which rocketed up as much as 15%—to north of $13/share—from the close of $11.39.

“Since our merger one year ago, we have delivered better-than-expected financial performance for four consecutive quarters,” stated Activision Blizzard CEO Robert Kotick, CEO. “Our second quarter overperformance was driven by Activision Publishing’s PROTOTYPE, Transformers: Revenge of the Fallen, X-Men Origins: Wolverine and the Guitar Hero and Call of Duty franchises, as well as Blizzard Entertainment’s World of Warcraft. During a challenging economic climate, Activision Blizzard grew its quarterly North American and European market share 2.8 points across all platforms to 12.7% from 9.9% for the previous year and was the #1 North American third-party console and handheld publisher for the quarter and first six months of the calendar year.”

And for the second time this year, company management raised guidance for FY2009 profits, this time from 24¢ per share to 26¢ per share. Citing decisions to delay the publication of Starcraft II and Singularity from late 2009 to the first half of 2010, they lowered revenue guidance for the full year from $4.3 billion to $4.05 billion.

Highlights of the second quarter included:

  • For the second quarter, Activision Publishing was the #1 U.S. third-party console and handheld publisher and had three of the top-10 best-selling titles in the U.S.—PROTOTYPE, Guitar Hero World Tour, and Wolverine
  • For the first six months of the calendar year, Activision Publishing had two of the top-five best-selling titles in North America and Europe—Guitar Hero World Tour and Call of Duty: World at War—and grew their North American and European market share of the music/dance category eight points to 53% as compared to the same period last year
  • During the quarter, Activision Blizzard was the #1 publisher overall in North America and Europe on the Xbox 360™ and the PlayStation® 2
  • Activision Blizzard increased its European market share by 2.8 points to 10.5% for the quarter, as compared to the same period during the previous calendar year
  • Activision Publishing’s new IP PROTOTYPE, was the #1 best-selling console title in North America for the month of June
  • X-Men Origins: Wolverine and  Transformers: Revenge of the Fallen were respectively the #1 and #2 best-selling movie games released on the same dates as their respective theatrical films in North America for the second quarter
  • Guitar Hero was the #1 third-party franchise in North America and Europe for the first six months of the calendar year

Also, last month Activision Blizzard’s Board of Directors authorized an increase of $250 million to the company’s stock repurchase program bringing the total authorization to $1.25 billion. As of 30 June, Activision Blizzard had purchased $668 million—or approximately 64 million shares—of common stock at an average price of $10.41, under its stock repurchase program.

There was also news on the World of Warcraft (WoW) front…mixed news. The good news was that Sam Raimi of the Spider-Man trilogy and “Drag Me to Hell” fame has signed on to direct the forthcoming WoW feature film. No date has been announced for the movie’s release. The not-so-good news, as usual, emanated from China. On 16 July, Blizzard and their newly anointed replacement licensee NetEase (NTSE) announced that WoW—which has been offline since midnite 7 June, when former licensee The9’s (NCTY) old contract expired—is ready to relaunch pending receipt of the necessary approval from the Chinese government. Howsoever, no such approval has yet been achieved and with the outage having lasted two months—and no end in sight—concerns are mounting as to how many of China’s million-plus WoW players will return to the fold once it restarts. Some mainland players have opened new accounts in Taiwan—where servers feature the long-delayed-on-the-mainland “Wrath of the Lich King” expansion as an added attraction—but connection times are slow and Blizzard is not supporting the migration of existing characters from mainland accounts which means players have to start from scratch to develop new characters. In the meantime, other MMORPG game publishers are marketing hard to recruit idle WoW players.

In 3Q09, ATVI management plan to release:

  • Guitar Hero 5 for the Xbox 360, PLAYSTATION®3, Wii™, and PlayStation 2
  • Marvel: Ultimate Alliance 2 for the Xbox 360, PLAYSTATION 3, Wii, PlayStation 2, PlayStation Portable, and the Nintendo DS™
  • Wolfenstein for the Xbox 360, PLAYSTATION 3, and Windows.

The release date for the sf first-person action title, Singularity, has been pushed back to the first quarter of 2010, when there will be fewer competitive titles releasing. Hopefully, this should improve the probability of achieving stronger sales. The release date for the sf real-time strategy game, StarCraft II, has been delayed to the first half of 2010 to coincide with the relaunch of the company’s upgraded Battle.net® online-gaming service. Overall for 3Q09, Activision Blizzard expect GAAP net revenues of $680 million, and project a GAAP loss per diluted share of three cents.

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Activision Blizzard (ATVI) update #5—strong lineup of future releases

Posted by intelledgement on Wed, 27 May 09

Activision Blizzard (ATVI), our game publisher company, published their lineup of forthcoming releases to be showcased at the 2009 Electronic Entertainment Expo (E3 Expo) taking place at the LA Convention Center 2-4 June 2009 today, and it’s pretty impressive:

  • PROTOTYPE puts the player into the shoes of Alex Mercer, a genetically mutated man without memory, armed with shape-shifting abilities, with the objective of discovering your purpose in life (and most likely rejecting it and punishing your creators for their presumption), for Xbox 360, PLAYSTATION 3, and Windows. Release date 2 Jun 09 (at E3).
  • Transformers™: Revenge of the Fallen is a licensed product based on the Dreamworks (DWA)-produced film—sequel to the 2007 film—based on the Hasbro (HAS) line of toys for the Xbox 360, PLAYSTATION 3, Wii, PlayStation 2, PlayStation Portable, Nintendo DS, and Windows. Release date 23 Jun 09.
  • Singularity is a new first-person shooter game set in a time travel scenario for Xbox 360, PLAYSTATION 3, and Windows. Release date 29 Jun 09.
  • Wolfenstein™ is the latest in a long line of sequels to the hoary 1981 Muse Software first-person shooter game, Castle Wolfenstein, for Xbox 360, PLAYSTATION 3, and Windows. Release date 4 Aug 09.
  • Modern Warfare 2, sequel to Call of Duty® 4: Modern Warfare™,  for Xbox 360, PLAYSTATION 3, and Windows. Release date 10 Nov 09.
  • Blur—a new car-racing game which can be played by up to four players on a console or up to 20 players online, for Xbox 360®, PLAYSTATION® 3, and Windows®. Release date not specified.
  • DJ Hero—the player controls a fully-rotating turntable, sample buttons, effects dial and cross fader, for Xbox 360, PLAYSTATION 3, PlayStation 2, and Wii™. Release date not specified.
  • Guitar Hero 5 features 85 of current bands plus several classic acts including The Rolling Stones, Santana, Tom Petty, Johnny Cash, and Bob Dylan, for Xbox 360, PLAYSTATION 3, Wii, and PlayStation 2 system.Release date not specified.
  • Tony Hawk: RIDE comes with a wireless skateboard controller and utilizes full motion sensing technology to enable the  player to control the action by performing various movements and gestures on the board that directly translate into skateboard maneuvers that are displayed onscreen, for Xbox 360, PLAYSTATION 3, and Wii. Release date not specified.
  • Ultimate Alliance 2 incorporates elements of the Marvel “Civil War” storyline, enabling players to choose their side and team up with such heroes and villains as Spider-Man, Wolverine, Hulk, Iron Man, Deadpool, Venom, Green Goblin and Captain America, for Xbox 360, PLAYSTATION 3, Wii, PlayStation 2, PlayStation Portable, and Nintendo DS™.Release date not specified.

Evidently, the lack of a mention of Starcraft II ensures it will not be released in 2009. Announced in 2007 and expected in 2008, the sequel to Blizzard’s 1994 real-time strategy game—which is still actively played online—will presumably require a large beta test before it is ready to be released, and there is no word on when that might start, either.

There is some WoW news from China, however. In the wake of Blizzard’s decision not to renew their WoW contract with The9 (NCTY} and instead strike a deal with Netease.com (NTES) last month, The9 have now filed suit in China against Activision Blizzard for property loss compensation and commercial defamation. Earlier this month, rumors surfaced that The9 are preparing a W0W clone game for release. Reportedly, The9 had agreed to cooperate with Netease.com to effect a smooth transition of the 1 million-plus Chinese WoW players from the former’s servers to the latter’s—The9’s license to run WoW games expires in June—but it is not clear how these latest developments may affect that situation. In the meantime, some Chinese WoW players, frustrated at the continued long delay in the deployment of the “Wrath of the Lich King” WoW upgrade module, have reportedly “defected” to Taiwanese WoW servers, where the upgrade has long since been installed. This is a real soap opera; stay tuned.

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Activision Blizzard (ATVI) update #4—1Q09 results surprize to upside

Posted by intelledgement on Thu, 07 May 09

Our game publishing company, Activision Blizzard (ATVI), today announced 1Q09 results that materially exceeded expectations. The company reported $981 million of revenues, as compared to guidance of $860 million and a profit of 14¢/share, as compared to guidance of 8¢. (Management had announced last month that 1Q09 results were tracking ahead of their prior guidance by had not provided any revisions to their guidance at that time.)

CEO Robert Kotick stated, “Our better-than-expected first quarter results were driven by strong global consumer response to the Call of Duty and Guitar Hero franchises and Blizzard Entertainment’s World of Warcraft, despite challenging economic times.” The company now expects 2Q09 revenues of $1B and profits of 10¢/share, powered by a spate of new product releases including three games inspired by theatrical motion pictures, X-Men Origins (which was released last week), Transformers™: Revenge of the Fallen and Ice Age™: Dawn of the Dinosaurs, as well as a new third-person action game Prototype™, Guitar Hero: Smash Hits™, a compilation of the most popular songs from previous Guitar Hero games that will now be playable as a full band experience and Guitar Hero On Tour: Modern Hits™ for the Nintendo DS. And they raised guidance for the full year from $4.2B of revenues to $4.3B and profits from 22¢/share to 24¢.

Highlights of the first quarter included:

  • Guitar Hero World Tour was the #1 best-selling third-party title in the U.S. across all platforms in dollars
  • In the U.S. and Europe, Guitar Hero World Tour was the #1 best-selling third-party title in dollars for the Nintendo Wii and the only third-party game to rank as a top-five best seller for the platform
  • Blizzard Entertainment’s World of Warcraft: Wrath of the Lich King remained the #1 PC game in dollars in the U.S.
  • Activision Blizzard had three of the top-10 best-selling PC titles in dollars in the U.S.
  • 1Q09 European sales for the Guitar Hero franchise grew 84% year over year
  • As of 10 April, Activision Publishing’s Crash Bandicoot Nitro Kart was the #1 paid app for the iPhone of all time
  • On February 24, 2009, Activision Publishing announced an agreement with Corus Entertainment Inc.’s Nelvana Enterprises to develop and distribute video games based on the breakout hit toy and wildly popular action animated television series Bakugan
  • On April 16, 2009, Blizzard Entertainment announced that its World of Warcraft (WoW) will be licensed to an affiliated company of NetEase.com, Inc. (NTES) in mainland China for a term of three years following the expiration of the current license agreement with The9 (NCTY).

Speaking of China, that remains one revenue wildcard for 2009. Over 10% of WoW players are in China, and the transition path for them from The9 servers to Netease.com servers is still unclear. (That is, will players be able to keep their characters—and in some cases months and years of invested gameplay—intact? Or will they have to start over from scratch?) Not to mention the prognosis for the “Wrath of the Lich King” WoW upgrade, the release of which in China has been long delayed, reportedly due to government review/approval issues (although some have speculated that The9 engineered the delays as a negotiating tactic). The The9 license expires in June and if Netease.com is not up-and-running by then—or there are issues migrating The9 players to the Netease.com servers—it would have an impact on revenues. Stay tuned.

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