Activision Blizzard Announces Better-Than-Expected Third Quarter 2010 Financial Results

Transcription

1 Activiion Blizzard Announce Better-Than-Expected Third Quarter 2010 Financial Reult -Third Quarter Net Revenue EPS Exceed Prior Outlook Prior Year- -Company Increae 2010 Net Revenue EPS Outlook- SANTA MONICA, Calif., Nov. 4, 2010 /PRNewwire-FirtCall/ -- Activiion Blizzard, Inc. (Nadaq: ATVI) today announced better-than-expected financial reult for the third quarter of For the quarter ended September 30, 2010, Activiion Blizzard' GAAP net revenue were $745 million, a compared to it prior third-quarter outlook of $600 million. On a non-gaap bai, the company' net revenue were $857 million, a compared to it prior third-quarter outlook of $725 million. For the quarter ended September 30, 2010, Activiion Blizzard' GAAP earning per diluted hare were $0.04, a compared to it prior third-quarter outlook of break even GAAP earning per hare. On a non-gaap bai, the company' earning per diluted hare were $0.12, a compared to it prior third-quarter outlook of $0.08. The company report reult on both a GAAP a non-gaap bai. Pleae refer to the table at the back of thi pre releae for a reconciliation of the company' GAAP non-gaap reult. Robert Kotick, CEO of Activiion Blizzard, tated, "For the third quarter, we exceeded our net revenue earning per hare outlook delivered trong year-over-year growth. Our betterthan-expected reult are due to our leaderhip in online entertainment, including trong performance from Activiion Publihing' Call of Duty franchie, Blizzard Entertainment' World of Warcraft StarCraft II: Wing of Liberty. For the nine month ending September 30, 2010, our digital offering contributed cloe to half of our total non-gaap net revenue our digital revenue have increaed more than 15% over the prior year. Mot importantly, we continue to deliver ome of the world' bet game." Kotick continued, "Activiion Publihing i about to introduce what i likely to be the bigget entertainment launch of the year with Call of Duty : Black Op, followed by Blizzard Entertainment' World of Warcraft: Cataclym, which we believe will deliver an incredible breadth of new content to the world' larget maively multiplayer online role playing game (MMORPG) community. A a reult of our over-performance, we are raiing our calendar year 2010 net revenue earning outlook. We expect to deliver the mot profitable year in our hitory with record operating margin." Buine Highlight For the firt nine month of the calendar year, Activiion Publihing' Call of Duty wa the #1 thirdparty franchie in the U.S. Europe, Blizzard Entertainment' StarCraft II: Wing of Liberty wa the #1 PC title overall, according to The NPD Group, Charttrack Gfk. Additionally, for the third quarter of the calendar year, Activiion Blizzard wa the #1 PC publiher in the U.S. Europe, according to The NPD Group, Charttrack Gfk. Other highlight are a follow: During the third quarter of 2010, Call of Duty remained a top-10 franchie overall in the U.S. Europe, according to The NPD Group, Charttrack Gfk. On Augut 3, Blizzard Entertainment announced that StarCraft II: Wing of Liberty old more than one million copie within the firt 24 hour of it releae, intantly making it the bet-elling PC game of 2010, more than 1.5 million copie within the firt 48 hour of it releae, making it the fatet-elling trategy game of all time. On Augut 31, Blizzard Entertainment NetEae.com Inc. launched World of Warcraft: Wrath of the Lich King, the econd expanion for Blizzard Entertainment' award-winning ubcription-baed MMORPG, in mainl China.

2 On September 1, Blizzard Entertainment announced that StarCraft II: Wing of Liberty old more than three million copie worldwide in the firt month of it releae. On October 4, Blizzard Entertainment announced that World of Warcraft: Cataclym, the highly anticipated third expanion for the world' mot popular ubcription-baed MMORPG, will be releaed on December 7. On October 5, Activiion Publihing announced that Treyarch' Call of Duty: Black Op will be playable in tereocopic 3D when the game launche at retail outlet worldwide on November 9. On October 7, Blizzard Entertainment announced that the ubcriber bae for World of Warcraft ha exceeded 12 million player worldwide. A of September 30, Activiion Blizzard had purchaed approximately 55 million hare of it common tock, for approximately $600 million, under the $1 billion tock repurchae program authorized by it Board of Director on February 10. Additionally, on September 7, advertiing indutry veteran Eric Hirhberg joined Activiion Publihing a Chief Executive Officer, to overee operational management of the publihing diviion' tudio, product development conumer marketing function. Company Outlook In the fourth quarter of 2010, Activiion Publihing expect to releae ix new title including Bakugan : Defender of the Core, a highly anticipated kid title baed on the award-winning toy line televiion how; DJ Hero 2, which deliver an exciting ocial multiplayer muic experience where two virtual DJ can mix together while a vocalit ing along to lyric from today' bigget hit; Goldeneye 007, which wa deigned to make full ue of the Nintendo Wii' unique interactive capabilitie allow player to channel Daniel Craig' lethal gritty Jame Bond in a new take on the legendary Bond adventure; Jame Bond 007 : Bloodtone, a cinematic action game that allow player to experience the brutal dangerou tyle of Daniel Craig' Bond a they engage in h-to-h fighting, cover-baed hooting, aggreive driving through dynamic environment; Tony Hawk : SHRED, which let kid "GO BIG" feel the exhilaration of kate nowboarding like the pro uing the game' motion-ening board controller. Activiion Publihing alo plan to releae Treyarch' highly anticipated firt-peron action game Call of Duty: Black Op globally on November 9. The company expect the title will be one of the top entertainment propertie of the holiday eaon we expect that pre-order for the game will et an indutry record. Additionally, on December 7, Blizzard Entertainment expect to releae World of Warcraft: Cataclym, the highly anticipated third expanion for the world' mot popular ubcription-baed MMORPG, World of Warcraft. Activiion Blizzard' outlook i baed on aumption about ell through rate for it product the launch timing, ucce pricing of it new late of product which are ubject to ignificant rik uncertaintie, including poible decline in the overall dem for video game in the dem for the company' product, the dependence in the interactive oftware indutry by the company on an increaingly limited number of popular franchie for a diproportionately high percentage of revenue profit, the company' ability to predict hift in conumer preference among genre, uch a muic caual game, competition. Current macroeconomic condition market condition within the video game indutry increae thoe rik uncertaintie. The company' outlook i alo ubject to other rik uncertaintie, including litigation aociated cot, fluctuation in foreign exchange tax rate, counterparty rik relating to cutomer, licenee, licenor manufacturer. A a reult of thee other factor, actual reult may deviate materially from the outlook preented below.

3 For the full year 2010, Activiion Blizzard i raiing it outlook for GAAP net revenue to $4.28 billion GAAP earning per diluted hare to $0.51, a compared to it prior GAAP outlook of $4.18 billion in net revenue $0.49 in earning per diluted hare. On a non-gaap bai, the company now expect net revenue of $4.45 billion $0.74 earning per diluted hare, a compared to it prior non-gaap net revenue outlook of $4.4 billion $0.72 in earning per diluted hare. For the fourth quarter of 2010, Activiion Blizzard expect GAAP net revenue of $1.26 billion, a GAAP lo per hare of $0.01. On a non-gaap bai, the company expect net revenue of $2.2 billion $0.47 earning per diluted hare for the fourth quarter. Conference Call Today at 4:30 p.m. EDT, Activiion Blizzard' management will hot a conference call Webcat to dicu the company' reult for the quarter ended September 30, 2010 management' outlook for the remainder of the calendar year. The company welcome all member of the financial media communitie other intereted partie to viit the "Invetor Relation" area of to liten to the conference call via live Webcat, or to liten to the call live by dialing into in the U.S. with the pacode Non-GAAP Financial Meaure Activiion Blizzard provide net revenue, net income (lo), earning (lo) per hare operating margin data guidance both including (in accordance with GAAP) excluding (non-gaap) the following item: the impact of the change in deferred net revenue related cot of ale with repect to certain of the company' online-enabled game; expene related to hare-baed payment; Activiion Blizzard' non-core exit operation (which are the operating reult of product operation of the hitorical Vivendi Game, Inc. buinee that the company ha exited or ubtantially wound down); cot related to the buine combination between Activiion, Inc. Vivendi Game, Inc. (including tranaction cot, integration cot, retructuring activitie); the amortization of intangible impairment of intangible aet; the aociated tax benefit. Management believe that the preentation of thee non-gaap financial meaure provide invetor with additional ueful information to meaure Activiion Blizzard' financial operating performance becaue they facilitate comparion of operating performance between period help invetor to better undert the operating reult of Activiion Blizzard. Internally, management ue thee non- GAAP financial meaure in aeing the company' operating reult, a well a in planning forecating. Non-GAAP financial meaure hould be conidered in addition to, not a a ubtitute for or uperior to, financial meaure determined in accordance with GAAP. Activiion Blizzard recognize that there are limitation aociated with the ue of thee non-gaap financial meaure. Activiion Blizzard' non-gaap financial meaure are not baed on a comprehenive et of accounting rule or principle, the term non-gaap net revenue, non-gaap net income, non- GAAP earning per hare, non-gaap operating margin do not have a tardized meaning. Therefore, other companie may ue the ame or imilarly named meaure, but exclude different item, which may not provide invetor a comparable view of Activiion Blizzard' performance in relation to other companie. Management compenate for the limitation reulting from the excluion of thee item by conidering the impact of the item eparately by conidering Activiion Blizzard' GAAP a well a non-gaap reult outlook, in thi releae, by preenting the mot comparable GAAP meaure directly ahead of non-gaap meaure, by providing a reconciliation that indicate decribe the adjutment made. About Activiion Blizzard

4 Headquartered in Santa Monica, California, Activiion Blizzard, Inc. i a worldwide online, PC, conole, hheld mobile game publiher with leading poition acro every major category of the rapidly growing interactive entertainment oftware indutry. Activiion Blizzard maintain operation in the U.S., Canada, the United Kingdom, France, Germany, Irel, Italy, Sweden, Spain, the Netherl, Autralia, South Korea China. More information about Activiion Blizzard it product can be found on the company' webite, Cautionary Note Regarding Forward-looking Statement: Information in thi pre releae that involve Activiion Blizzard' expectation, plan, intention or trategie regarding the future, including tatement under the heading "Company Outlook," are forward-looking tatement that are not fact involve a number of rik uncertaintie. Activiion Blizzard generally ue word uch a "outlook," "will," "could," "would," "might," "remain," "to be," "plan," "believe," "may," "expect," "intend," "anticipate," "etimate," "future," "plan," "poitioned," "potential," "project," "remain," "cheduled," "et to," "ubject to," "upcoming" imilar expreion to identify forwardlooking tatement. Factor that could caue Activiion Blizzard' actual future reult to differ materially from thoe expreed in the forward-looking tatement et forth in thi releae include, but are not limited to, ale level of Activiion Blizzard' title, increaing concentration of title, hift in conumer pending trend, the impact of the current macroeconomic environment market condition within the video game indutry, the eaonal cyclical nature of the interactive game market, Activiion Blizzard' ability to predict conumer preference among competing hardware platform, poible decline in oftware pricing, product return price protection, product delay, retail acceptance of Activiion Blizzard' product, adoption rate availability of new hardware (including peripheral) related oftware, indutry competition including from ued game other form of entertainment, litigation rik aociated cot, rapid change in technology, indutry tard, buine model including online ued game, conumer preference including interet in pecific genre uch a muic, firt-peron action maively multiplayer online game, protection of proprietary right, maintenance of relationhip with key peronnel, cutomer, licenee, licenor, vendor, third-party developer, including the ability to attract, retain develop key peronnel developer that can create high quality "hit" title, counterparty rik relating to cutomer, licenee, licenor manufacturer, dometic international economic, financial political condition policie, foreign exchange rate tax rate, the identification of uitable future acquiition opportunitie potential challenge aociated with geographic expanion, the other factor identified in the rik factor ection of Activiion Blizzard' mot recent annual report on Form 10-K. The forward-looking tatement in thi releae are baed upon information available to Activiion Blizzard a of the date of thi releae, Activiion Blizzard aume no obligation to update any uch forward-looking tatement. Although thee forwardlooking tatement are believed to be true when made, they may ultimately prove to be incorrect. Thee tatement are not guarantee of the future performance of Activiion Blizzard are ubject to rik, uncertaintie other factor, ome of which are beyond it control may caue actual reult to differ materially from current expectation. (Table to Follow) ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) ( in million, except per hare data) Three Month Ended September 30, Nine Month Ended September 30, Net revenue: Product ale $ 397 $ 411 $ 2,025 $ 1,848

5 Subcription, licening other revenue net revenue ,019 2,722 Cot expene: Cot of ale - product cot Cot of ale - oftware royaltie amortization Cot of ale - intellectual property licene Cot of ale - maively multi-player online role playing game ("MMORPG") Product development Sale marketing General adminitrative Retructuring --- (1) cot expene ,154 2,316 Operating income Invetment other income, net Income before income tax expene Income tax expene Net income $ 51 $ 15 $ 651 $ 399 Baic earning per common hare $ 0.04 $ 0.01 $ 0.53 $ 0.31 Weighted average common hare outting 1,212 1,271 1,230 1,289 Diluted earning per common hare $ 0.04 $ 0.01 $ 0.52 $ 0.30 Weighted average common hare outting auming dilution 1,227 1,297 1,245 1,320 ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) ( in million) September 30, December 31, ASSETS Current aet: Cah cah equivalent $ 2,123 $ 2,768 Short-term invetment Account receivable, net Inventorie Software development Intellectual property licene Deferred income taxe, net

6 Other current aet current aet 4,148 5,329 Long-term invetment Software development Intellectual property licene Property equipment, net Other aet 14 9 Intangible aet, net Trademark trade name Goodwill 7,144 7,154 aet $ 12,570 $ 13,742 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilitie: Account payable $ 238 $ 302 Deferred revenue 622 1,426 Accrued expene other liabilitie current liabilitie 1,393 2,507 Deferred income taxe, net Other liabilitie liabilitie 1,824 2,986 Shareholder' equity: Common tock Additional paid-in capital 12,313 12,376 Treaury tock (1,848) (1,235) Retained earning (accumulated deficit) 290 (361) Accumulated other comprehenive lo (9) (24) hareholder' equity 10,746 10,756 liabilitie hareholder' equity $ 12,570 $ 13,742 ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP NET INCOME TO NON-GAAP MEASURES ( in million, except earning per hare data) Three Month Ended September 30, 2010 Net Revenue Cot of Sale - Produc t Cot Cot of Sale - Software Royaltie Amortizatio n Cot of Sale - Intellectua l Property Licene Cot of Sale - MMORP G Product Developmen t Sale Marketin g General Adminitrativ e Cot Expene GAAP Meaurement $ 745 $ 194 $ 61 $ 33 $ 61 $ 119 $ 111 $ 111 $ 690

7 Le: Net effect from deferral in net revenue related cot of (a ale ) Le: Stockbaed (b compenation ) - - (11) - - (6) (2) (15) (34) Le: Amortization of intangible aet purchae price accounting related adjutment (d ) - (1) (5) (12) (18) Non-GAAP Meaurement $ 857 $ 196 $ 53 $ 25 $ 61 $ 113 $ 109 $ 96 $ 653 Three Month Ended September 30, 2010 Operatin Net g Income Income Baic Earning per Share Diluted Earning per Share GAAP Meaurement $ 55 $ 51 $ 0.04 $ 0.04 Le: Net effect from deferral in net revenue related cot of (a ale ) Le: Stockbaed compenation ) Le: Amortization of intangible aet purchae price accounting related adjutment (d ) 18 (5) - - Non-GAAP Meaurement $ 204 $ 148 $ 0.12 $ 0.12 Nine Month Ended September 30, 2010 Net Revenue Cot of Sale - Produc t Cot Cot of Sale - Software Royaltie Amortizatio n Cot of Sale - Intellectua l Property Licene Cot of Sale - MMORP G Product Developmen t Sale Marketin g General Adminitrativ e Cot Expene GAAP Meaurement $ 3,019 $ 765 $ 211 $ 105 $ 168 $ 366 $ 294 $ 245 $ 2,154 Le: Net effect from deferral in net revenue related cot of ale (a ) (765) (198 ) (16) (12) (226)

8 Le: Stockbaed (b compenation ) - - (51) - - (4) (6) (33) (94) Le: Retructuring (included in general adminitrative ) (c) (3) (3) Le: Amortization of intangible aet purchae price accounting related adjutment (d ) - (3) (10) (33) (1) (47) Non-GAAP Meaurement $ 2,254 $ 564 $ 134 $ 60 $ 168 $ 362 $ 288 $ 208 $ 1,784 Nine Month Ended September 30, 2010 Operatin Net g Income Income Baic Earning per Share Diluted Earning per Share GAAP Meaurement $ 865 $ 651 $ 0.53 $ 0.52 Le: Net effect from deferral in net revenue related cot of (a (392 ale ) (539) ) (0.32) (0.31) Le: Stockbaed (b compenation ) Le: Retructuring (included in general adminitrative ) (c) Le: Amortization of intangible aet purchae price accounting related adjutment (d ) Non-GAAP Meaurement $ 470 $ 337 $ 0.27 $ 0.27 (a) Reflect the net change in deferred net revenue related cot of ale. (b) Include expene related to tock-baed compenation. (c) Reflect retructuring related to the Buine Combination with Vivendi Game. Retructuring activitie include everance cot, facility exit cot balance heet write down exit cot from the cancellation of project. (d) Reflect amortization of intangible aet, the change in the fair value of aet liabilitie from purchae price accounting related adjutment. The per hare adjutment are preented a calculated, the GAAP non-gaap earning per hare information i alo preented a calculated. The um of thee meaure, a preented, may differ due to the impact of rounding.

9 ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP NET INCOME TO NON-GAAP MEASURES ( in million, except earning per hare data) Three Month Ended September 30, 2009 Net Revenue Cot of Sale - Produ ct Cot Cot of Sale - Software Royaltie Amortizati on Cot of Sale - Intellectu al Property Licene Cot of Sale - MMORP G Product Developme nt Sale Marketin g General Adminitrati Retructuri ve ng Cot Expene GAAP Meaureme nt $ 703 $ 185 $ 54 $ 45 $ 55 $ 122 $ 128 $ 106 $ (1) $ 694 Le: Net effect from deferral in net revenue related cot of ale (a ) Le: Stockbaed compenati (b on ) - - (3) - - (11) (2) (20) - (36) Le: Cot related to the Buine Combinatio n, integration retructurin (d g ) (7) 1 (6) Le: Amortizatio n of intangible aet purchae price accounting related adjutment (e ) - (1) (8) (24) (33) Non-GAAP Meaureme nt $ 755 $ 204 $ 74 $ 26 $ 55 $ 111 $ 131 $ 79 $ - $ 680 Three Month Ended September 30, 2009 Operatin g Income Net Incom e Baic Earning per Share Diluted Earning per Share GAAP Meaureme nt $ 9 $ 15 $ 0.01 $ 0.01 Le: Net (a (9)

10 effect from ) deferral in net revenue related cot of ale Le: Stockbaed compenati (b on ) Le: Cot related to the Buine Combinatio n, integration retructurin (d g ) Le: Amortizatio n of intangible aet purchae price accounting related adjutment (e ) Non-GAAP Meaureme nt $ 75 $ 55 $ 0.04 $ 0.04 Nine Month Ended September 30, 2009 GAAP Meaureme Net Revenue Cot of Sale - Produ ct Cot Cot of Sale - Software Royaltie Amortizati on Cot of Sale - Intellectu al Property Licene Cot of Sale - MMORP G Product Developme nt Sale Marketin g General Adminitrati Retructuri ve ng Cot Expene nt 2,72 $ 2 $ 762 $ 212 $ 163 $ 158 $ 362 $ 329 $ 301 $ 29 $ Le: Net effect from deferral in net revenue related cot of (a ale ) (441) (79) (20) (6) (100) Le: Stockbaed compenati (b on ) - - (19) - - (28) (9) (51) - (107) Le: Reult of Activiion Blizzard' non-core exit (c operation ) (1) (3) (10) - (9) Le: (d (24) (29) (53) 2,31 6

11 Cot ) related to the Buine Combinatio n, integration retructurin g Le: Amortizatio n of intangible aet purchae price accounting related adjutment (e ) - (4) (36) (75) (2) - (117) Non-GAAP Meaureme nt $ 0 $ 679 $ 137 $ 82 $ 158 $ 338 $ 322 $ 214 $ - $ 1,93 0 Nine Month Ended September 30, 2009 Operatin g Income Net Incom e Baic Earning per Share Diluted Earning per Share GAAP Meaureme nt $ 406 $ 399 $ 0.31 $ 0.30 Le: Net effect from deferral in net revenue related cot of ale (a ) (341) (274 ) (0.21) (0.21) Le: Stockbaed compenati (b on ) Le: Reult of Activiion Blizzard' non-core exit operation ) Le: Cot related to the Buine Combinatio n, integration retructurin (d g ) Le: Amortizatio n of intangible aet (e )

12 purchae price accounting related adjutment Non-GAAP Meaureme nt $ 350 $ 278 $ 0.21 $ 0.21 (a) Reflect the net change in deferred net revenue related cot of ale. (b) Include expene related to tock-baed compenation. (c) Reflect the reult of product operation from the hitorical Vivendi Game buinee that the company ha exited, diveted or wound down. (d) Reflect cot related to the Buine Combination with Vivendi Game (including tranaction cot, integration cot retructuring activitie). Retructuring activitie include everance cot, facility exit cot balance heet write down exit cot from the cancellation of project. (e) Reflect amortization of intangible aet, the change in the fair value of aet liabilitie from purchae price accounting related adjutment. The per hare adjutment are preented a calculated, the GAAP non-gaap earning per hare information i alo preented a calculated. The um of thee meaure, a preented, may differ due to the impact of rounding. ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES FINANCIAL INFORMATION For the Three Month Ended September 30, ( in million) GAAP Net Revenue by Segment/Platform Mix Three Month Ended September 30, 2010 September 30, 2009 $Increae % Increae (Decreae) (Decreae) Activiion Blizzard: MMORPG $ % $ % $ (17) (6) % PC other Sony PlayStation Sony PlayStation (31) (84) Microoft Xbox Nintendo Wii (16) (22) conole Sony PlayStation Portable (6) (67) Nintendo Dual Screen (1) (5) hheld (7) (23) Activiion Blizzard Ditribution: Ditribution conolidated GAAP net revenue

13 Change in Deferred Net Revenue(1) Activiion Blizzard: MMORPG (7) (31) PC other Sony PlayStation 3 (5) 34 Microoft Xbox 360 (26) 38 Nintendo Wii 9 8 conole (22) 80 change in deferred net revenue Non-GAAP Net Revenue by Segment/Platform Mix Activiion Blizzard: MMORPG PC other NM Sony PlayStation (3) (3) Sony PlayStation (31) (84) Microoft Xbox (41) (29) Nintendo Wii (15) (19) conole (90) (25) Sony PlayStation Portable (6) (67) Nintendo Dual Screen (1) (5) hheld (7) (23) Activiion Blizzard Ditribution non-gaap net revenue(2) $ % $ % $ % (1) We provide net revenue including (in accordance with GAAP) excluding (non-gaap) the impact of change in deferred net revenue. (2) non-gaap net revenue preented alo repreent our total operating egment net revenue. ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES FINANCIAL INFORMATION For the Nine Month Ended September 30, ( in million) Nine Month Ended GAAP Net Revenue by Segment/Platform Mix September 30, 2010 September 30, 2009 $Increae % Increae (Decreae) (Decreae) Activiion Blizzard: MMORPG $ % $ % $ (62) (7) %

14 PC other Sony PlayStation Sony PlayStation (92) (76) Microoft Xbox Nintendo Wii (57) (18) conole 1, , Sony PlayStation Portable (21) (66) Nintendo Dual Screen (5) (5) hheld (26) (20) Activiion Blizzard 2, , Ditribution: Ditribution (17) (8) platform mix net revenue 3, , Other(1) (1) NM conolidated GAAP net revenue 3, , Change in Deferred Net Revenue(1) Activiion Blizzard: MMORPG (13) (106) PC other 81 (26) Sony PlayStation 3 (317) (84) Microoft Xbox 360 (425) (145) Nintendo Wii (91) (80) conole (833) (309) change in deferred net revenue (765) (441) Other(1) - (1) Non-GAAP Net Revenue by Segment/Platform Mix Activiion Blizzard: MMORPG PC other NM Sony PlayStation Sony PlayStation (92) (76) Microoft Xbox (62) (16) Nintendo Wii (68) (28) conole , (216) (21) Sony PlayStation Portable (21) (66) Nintendo Dual Screen (5) (5) hheld (26) (20) Activiion Blizzard 2, , (9) -

15 Ditribution (17) (8) non-gaap net revenue(2) $ 2, % $ 2, % $ (26) (1) % (1) We provide net revenue including (in accordance with GAAP) excluding (non-gaap) the impact of change in deferred net revenue other. (2) non-gaap net revenue preented alo repreent our total operating egment net revenue. ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES FINANCIAL INFORMATION For the Three And Nine Month Ended September 30, ( in million) Three Month Ended GAAP Net Revenue by Geographic Region September 30, 2010 September 30, 2009 $Increae % Increae (Decreae) (Decreae) North America $ % $ % $ 28 7 % Europe (6) (2) Aia Pacific conolidated GAAP net revenue Change in Deferred Net Revenue(1) North America Europe Aia Pacific 18 4 change in net revenue Non-GAAP Net Revenue by Geographic Region North America Europe Aia Pacific non-gaap net revenue(2) $ % $ % $ % Nine Month Ended GAAP Net Revenue by Geographic Region September 30, 2010 September 30, 2009 $Increae % Increae (Decreae) (Decreae) North America $ 1, % $ 1, % $ % Europe 1, , Aia Pacific geographic region net revenue 3, ,

16 Other(1) (1) NM conolidated GAAP net revenue 3, , Change in Deferred Net Revenue(1) North America (462) (287) Europe (280) (147) Aia Pacific (23) (7) change in net revenue (765) (441) Other(1) - (1) Non-GAAP Net Revenue by Geographic Region North America 1, , Europe (79) (8) Aia Pacific non-gaap net revenue(2) $ 2, % $ 2, % $ (26) (1) % (1) We provide net revenue including (in accordance with GAAP) excluding (non-gaap) the impact of change in deferred net revenue. (2) non-gaap net revenue preented alo repreent our total operating egment net revenue. ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES SEGMENT INFORMATION For the Three And Nine Month Ended September 30, ( in million) Segment net revenue: Three Month Ended September 30, 2010 September 30, 2009 $Increae % Increae (Decreae) (Decreae) Activiion(i) $ % $ % $ (101) (24) % Blizzard(ii) Ditribution(iii) Operating egment total Reconciliation to conolidated net revenue: Net effect from deferral of net revenue (112) (15) (52) (7) Conolidated net revenue $ % $ % 42 6 Segment income (lo) from operation: Activiion(i) $ (43) $ (43) - NM

17 Blizzard(ii) Ditribution(iii) 1 2 (1) NM Operating egment total Reconciliation to conolidated operating income: Net effect from deferral of net revenue related cot of ale (97) 9 Stock-baed compenation expene (34) (36) Retructuring - 1 Amortization of intangible aet purchae price accounting related adjutment (18) (33) Integration tranaction cot - (7) Conolidated operating income $ 55 $ 9 $ 46 NM Operating margin from total operating egment 24% 10% Segment net revenue: Nine Month Ended September 30, 2010 September 30, 2009 $Increae % Increae (Decreae) (Decreae) Activiion(i) $ % $ 1, % $ (228) (19) % Blizzard(ii) 1, Ditribution(iii) (17) (8) Operating egment total 2, , (26) (1) Reconciliation to conolidated net revenue: Net effect from deferral of net revenue Other(iv) Conolidated net revenue $ 3, % $ 2, % Segment income (lo) from operation: Activiion(i) $ (88) $ (49) (39) NM Blizzard(ii) Ditribution(iii) (1) 6 (7) NM Operating egment total Reconciliation to conolidated operating income: Net effect from deferral of net revenue related cot of ale Stock-baed compenation expene (94) (107) Retructuring (3) (29) Amortization of intangible aet purchae price accounting related adjutment (47) (117)

18 Integration tranaction cot - (24) Other(iv) - (8) Conolidated operating income $ 865 $ 406 $ % Operating margin from total operating egment 21% 15% (i) Activiion Publihing ("Activiion") - publihe interactive entertainment oftware peripheral. (ii) Blizzard - Blizzard Entertainment, Inc. it ubidiarie ("Blizzard") publihe game online ubcription-baed game in the MMORPG category. (iii) Activiion Blizzard Ditribution ("Ditribution") - ditribute interactive entertainment oftware hardware product. (iv) Other repreent Non-Core activitie, which are legacy Vivendi Game' diviion or buine unit that we have exited, diveted or wound down a part of our retructuring integration effort a a reult of the Buine Combination. Prior to July 1, 2009, Non-Core activitie were managed a a t alone operating egment; however, in light of the minimal activitie inignificance of Non-Core activitie, a of that date we ceaed their management a a eparate operating egment conequently, we are no longer providing eparate operating egment dicloure. ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES OUTLOOK For the Quarter Ending December 31, 2010 Year Ending December 31, 2010 GAAP to Non-GAAP Reconciliation ( in million, except per hare data) Outlook for Outlook for Three Month Ending Year Ending December 31, 2010 December 31, 2010 Net Revenue (GAAP) $ 1,260 $ 4,280 Excluding the impact of: Change in deferred net revenue (a) Non-GAAP Net Revenue $ 2,200 $ 4,450 (Lo)/Earning Per Diluted Share (GAAP) $ (0.01) $ 0.51 Excluding the impact of: Net effect from deferral in net revenue related cot of ale (b) Stock-baed compenation (c) Amortization of intangible aet (d) Non-GAAP Earning Per Diluted Share $ 0.47 $ 0.74 (a) Reflect the net change in deferred net revenue. (b) Reflect the net change in deferred net revenue related cot of ale. (c) Reflect expene related to tock-baed compenation.

19 (d) Reflect amortization of intangible aet. The per hare adjutment are preented a calculated, the GAAP non-gaap earning (lo) per hare information i alo preented a calculated. The um of thee meaure, a preented, may differ due to the impact of rounding. SOURCE Activiion Blizzard, Inc.