Activision Blizzard Reports December Quarter and Calendar Year 2009 Financial Results

- Company Announces $1 Billion Share Repurchase Program -

- Annual Cash Dividend of $0.15 per Common Share -

- For CY 2010 Company Expects Record Operating Margin and EPS -

10 Feb, 2010, 16:15 ET from Activision Blizzard, Inc.

SANTA MONICA, Calif., Feb. 10 /PRNewswire-FirstCall/ -- Activision Blizzard, Inc. (Nasdaq: ATVI) today announced December quarter and calendar year 2009 financial results.

For calendar year 2009, Activision Blizzard’s GAAP net revenues were $4.28 billion.  On a non-GAAP basis, the company’s net revenues were $4.78 billion.

For calendar year 2009, Activision Blizzard’s GAAP earnings per diluted share were $0.09.  The results include a $0.19 per share reduction in the valuation of intangible assets reflecting the impact of a weaker market on the casual and music genres.  Excluding this charge, GAAP earnings per diluted share would have been $0.28 per share.  On a non-GAAP basis, the company’s earnings per diluted share were $0.69.

For the quarter ended December 31, 2009, Activision Blizzard’s GAAP net revenues were $1.56 billion.  On a non-GAAP basis, the company’s net revenues were $2.50 billion.

For the quarter ended December 31, 2009, Activision Blizzard had a GAAP loss per diluted share of $0.23.  The results include the $0.19 per share reduction in the valuation of intangible assets described above.  Excluding this charge, GAAP loss per share would have been $0.04.  On a non-GAAP basis, the company’s earnings per diluted share were $0.49.

Activision Blizzard reports results on both a GAAP and a non-GAAP basis.  Please refer to the tables at the back of this press release for a reconciliation of the company’s GAAP and non-GAAP results.

Separately, Activision Blizzard also announced that its Board of Directors has authorized a stock repurchase program under which the company can repurchase up to $1 billion of the company's common stock.  The Board of Directors also declared an annual cash dividend of $0.15 per common share payable on April 2, 2010 to shareholders of record at the close of business on February 22, 2010.

Robert Kotick, CEO of Activision Blizzard, stated, “We delivered better-than-expected calendar year non-GAAP financial results and our fourth quarter non-GAAP net revenues and non-GAAP earnings per share were the highest in our company’s history. On a non-GAAP basis, our performance enabled us to deliver the most profitable year in our company’s history and record operating margin.  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, according to The NPD Group and internal Activision Blizzard estimates."

Kotick continued, “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®.”

“Our significant accomplishments in 2009 are the result of the expertise and skills of our employees around the world.  Their hard work and commitment to excellence made us stronger even during difficult times.  Our strategy and capabilities are supported by a very strong financial position. We continue to put our cash to work, including the announcements we made today – the authorization of our second billion dollar stock buyback program in two years and our first cash dividend, both of which reflect our confidence in the future and our 18-year commitment to industry leading shareholder value creation,” Kotick added.

Business Highlights

In the U.S. and Europe, for calendar year 2009, Activision Blizzard increased its share 1.8 points over the previous year across all platforms to 16% and had two of the top-five best-selling franchises on the consoles across all platforms -- Call of Duty and Guitar Hero®, according to The NPD Group, Charttrack and Gfk. Additionally, the company was the #1 U.S. publisher overall for the PlayStation® 3 computer entertainment system and the Xbox 360™ video game system from Microsoft and the #1 third-party publisher for the Nintendo Wii™, according to The NPD Group, Charttrack and Gfk.  

Other highlights are as follows:

  • For calendar year 2009, Activision Blizzard had the highest share point gain of any publisher in Europe from 11.9% to 13.9%, according to Charttrack and Gfk.
  • Guitar Hero was a top-four franchise overall and the #1 music franchise in the U.S. and Europe for the calendar year, according to The NPD Group, Charttrack and Gfk.
  • In the U.S. and Europe, DJ Hero™ was the highest grossing new intellectual property launched in 2009, according to The NPD Group, Charttrack and Gfk.
  • Activision Blizzard had two of the top five best-selling PC titles in dollars in the U.S. and Europe for the calendar year -- Call of Duty®: Modern Warfare™ 2 and Blizzard Entertainment’s World of Warcraft: Wrath of the Lich King™, according to The NPD Group, Charttrack and Gfk.
  • For the December quarter, Activision Blizzard was the #1 publisher overall in the U.S. and Europe and grew its share 1.7 points over the previous year across all platforms to 20.1%, according to The NPD Group, Charttrack and Gfk.
  • During the December quarter, in the U.S. and Europe, 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, according to The NPD Group, Charttrack and Gfk.
  • In November 2009, Call of Duty: Modern Warfare 2 became the first video game ever to surpass $550 million in retail sales in its first five days of release, according to Activision Publishing’s internal estimates.  To date, the game has sold more than $1 billion in retail sales worldwide, according to The NPD, Charttrack and Gfk.
  • On November 17, 2009, Activision Publishing announced the appointments of industry veterans Glen A. Schofield as Vice President and General Manager and Michael Condrey as Vice President and COO of Sledgehammer Games, a new wholly-owned game development studio located in Foster City, California.
  • On December 14, 2009, Activision Publishing announced that the company is currently in development on a new open world True Crime game inspired by classic Hollywood and Asian cinema-style action thrillers.  The game which is being developed by United Front Games is expected to launch later this year.
  • As of December 31, 2009, approximately 11.5 million gamers worldwide are subscribed to play Blizzard Entertainment’s World of Warcraft.
  • As of December 31, 2009, Activision Blizzard completed its $1.25 billion authorized stock repurchase program.  The company purchased approximately 115 million shares of common stock at an average price of $10.87 per share since the program’s inception in November 2008.
  • On February 2, 2010, Activision Publishing announced that David Haddad, Chief Operating Officer of Guitar Hero, has assumed the operational responsibilities for the Guitar Hero business unit.

Company Outlook

For the first quarter of calendar year 2010, Activision Publishing expects to release one title during the last week of March, How To Train Your Dragon™.  The game is based on DreamWorks Animation’s upcoming 3D movie and is expected to be published for the PlayStation 3 computer entertainment system, Xbox 360 video game system from Microsoft, Nintendo Wii and Nintendo DS™.

Activision Blizzard’s outlook is subject to significant risks and uncertainties including declines in demand for its products, competition, fluctuations in foreign exchange and tax rates, counterparty risks relating to customers, licensees, licensors and manufacturers and risks relating to the ongoing ability of Blizzard Entertainment’s licensee, NetEase.com, Inc., to operate World of Warcraft in China on a paying basis without interruption.  

The company’s outlook is also based on assumptions about sell through rates for its products, and the launch timing, success and pricing of its new slate of products.  Current macroeconomic conditions increase those risks and uncertainties.  As a result of these and other factors, actual results may deviate materially from the outlook presented below.

For calendar year 2010, Activision Blizzard expects GAAP net revenues of $4.2 billion, and GAAP earnings per diluted share of $0.47.  On a non-GAAP basis, the company expects net revenues of $4.4 billion and non-GAAP earnings per diluted share of $0.70 for the calendar year.  

For the first quarter 2010, Activision Blizzard expects GAAP net revenues of $1.1 billion, and GAAP earnings per diluted share of $0.20. On a non-GAAP basis, the company expects net revenues of $525 million and $0.02 earnings per diluted share for the March quarter.

Conference Call

Today at 4:30 p.m. EST, Activision Blizzard’s management will host a conference call and Webcast to discuss the company’s results for the quarter and year ended December 31, 2009 and management’s outlook for 2010. The company welcomes all members of the financial and media communities and other interested parties to visit the “Investor Relations” area of www.activisionblizzard.com to listen to the conference call and view a brief supporting slide presentation via live Webcast or to listen to the call live by dialing into 888-695-0608 in the U.S. with passcode 2419717.

Non-GAAP Financial Measures

Activision Blizzard provides net revenues, net income (loss), earnings (loss) per share and operating margin data and guidance both including (in accordance with GAAP) and excluding (non-GAAP): the impact of the change in deferred net revenues and related cost of sales with respect to certain of the company’s online-enabled games; expenses related to share-based payments; Activision Blizzard’s non-core exit operations (which are the operating results of products and operations of the historical Vivendi Games, Inc. businesses that the company has exited or substantially wound down); costs related to the business combination between Activision, Inc. and Vivendi Games, Inc. (including transaction costs, integration costs, and restructuring activities); the amortization of intangibles and impairment of intangible assets; and the associated tax benefits.  

As online functionality becomes a more important component of gameplay, certain of the company’s online-enabled games for certain platforms contain a more-than-inconsequential separate service deliverable in addition to the product, and the company's performance obligations for these games extend beyond the sale of the games. Vendor-specific objective evidence of fair value does not exist for the online services, as the company does not separately charge for this component of online-enabled games. As a result, the company recognizes all of the revenues from the sale of these games ratably over the estimated service period. In addition, the company defers the cost of sales of these titles to match revenues.

Revenue related to the sale of Blizzard Entertainment’s World of Warcraft boxed software, including the sale of expansion packs and other ancillary revenues, is deferred and recognized ratably over the estimated subscription life beginning upon activation of the software and delivery of the services.

As a consequence, the company's non-GAAP results exclude the impact of the change in deferred net revenues and related cost of sales associated with certain of the company’s online-enabled games for certain of the Microsoft, Sony, Nintendo and PC platforms and for World of Warcraft boxed software, including the sale of expansion packs and other ancillary revenues, to provide comparable year-over-year performance.

Management believes that the use of non-GAAP measures that eliminate the impact of the change in deferred net revenues and related cost of sales in its operating results is important when evaluating Activision Blizzard’s operating performance, and when planning, forecasting and analyzing future periods.

Management also believes that non-GAAP measures that exclude Activision Blizzard’s non-core exit operations, costs related to the business combination between Activision, Inc. and Vivendi Games, Inc. (including transaction costs, integration costs, and restructuring activities), the amortization of intangibles and the impairment of intangible assets provide a better comparison to prior periods in which Activision, Inc. and Vivendi Games, Inc. were operating as stand-alone companies, and that the resulting effects arising from the business combination do not affect the ongoing economics of the combined entity.

Management also believes that excluding expenses related to share-based payments provides more comparable operating performance results. Management believes that the presentation of these non-GAAP financial measures provides investors with additional useful information to measure Activision Blizzard’s financial and operating performance because they facilitate comparison of operating performance between periods and help investors to better understand the operating results of Activision Blizzard. Internally, management uses these non-GAAP financial measures in assessing the company's operating results, as well as in planning and forecasting.

Activision Blizzard recognizes that there are limitations associated with the use of these non-GAAP financial measures as they do not reflect net revenues, net income (loss), earnings (loss) per share and operating margin as determined in accordance with GAAP, and this may reduce comparability with other companies that calculate similar non-GAAP measures differently.  Management compensates for the limitations resulting from the exclusion of these items by considering the impact of these items separately and by considering Activision Blizzard's GAAP as well as non-GAAP results and outlook and, in this release, by presenting the most comparable GAAP measures directly ahead of non-GAAP measures, and by providing a reconciliation that indicates and describes the adjustments made.

Non-GAAP financial measures should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with GAAP.

Activision Blizzard’s non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles, and the terms non-GAAP net revenues, non-GAAP net income, non-GAAP earnings per share, and non-GAAP operating margin do not have a standardized meaning. Therefore, other companies may use the same or similarly named measures, but exclude different items, which may not provide investors a comparable view of Activision Blizzard's performance in relation to other companies.

Comparable-Basis Presentation by Segment -- Non-GAAP Comparable Measures

On July 9, 2008, the business combination between Activision, Inc. and Vivendi Games, Inc. was consummated.  As a result of the consummation of the business combination, Activision, Inc. was renamed Activision Blizzard, Inc.

For accounting purposes, because the business combination resulted in Vivendi S.A. obtaining control of Activision, Inc. through the acquisition of a majority of common stock of Activision, Inc., the business combination was treated as a “reverse acquisition,” with Vivendi Games, Inc. deemed to be the accounting acquirer.  As a result, the historical financial statements of Activision Blizzard prior to July 10, 2008 are those of Vivendi Games, Inc. and the results of Activision, Inc. prior to July 10, 2008 are not included as part of Activision Blizzard’s historical financial statements.

As one means of analyzing Activision Blizzard’s performance, the company presents data that combines (1) the company’s results after July 9, 2008, (2) Vivendi Games, Inc.’s results prior to July 10, 2008 and (3) Activision, Inc.’s results prior to July 10, 2008.

Management uses information prepared on this comparable basis internally to compare results and believes that this presentation provides investors with additional useful information to understand the company’s performance on a year-over-year comparable basis.  However, the data is not presented in accordance with GAAP and is not presented in accordance with Article 11 of Regulation S-X relating to pro forma financial statements.

The non-GAAP information presented should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with GAAP.

The following data is presented in the attachments to this press release:

  • Non-GAAP Comparable Basis Segment Net Revenues for the quarters and years ended  December 31, 2009 and 2008
  • Non-GAAP Comparable Basis Segment Operating Income (Loss) for the quarters and years ended December 31, 2009 and 2008

In conjunction with the business combination, Activision Blizzard changed the manner in which senior management assesses the operating performance of, and allocates resources to, its operating segments.  As a result, the company now operates in three segments:

  1. Activision Publishing (“Activision”) --  publishes interactive entertainment software and peripherals, which includes the Activision business conducted by Activision, Inc. prior to the business combination and certain studios, assets, and titles previously included in Vivendi Games Inc.’s “Sierra Entertainment” operating segment prior to the business combination;
  2. Blizzard -- Blizzard Entertainment, Inc. and its subsidiaries (“Blizzard”) -- publishes traditional games and online subscription-based games in the MMORPG category; and
  3. Activision Blizzard Distribution (“Distribution”) -- distribution of interactive entertainment software and hardware products.

With respect to periods prior to July 10, 2008, results for historical Activision, Inc. are reported in the Activision and Distribution segments. Prior to July 1, 2009, Activision Blizzard also presented a fourth segment, representing its non-core exit operations.  These operations are now insignificant and no longer are presented as a separate operating segment.  Therefore, all prior period segment information has been reclassified to conform to the current period’s presentation.

About Activision Blizzard

Headquartered in Santa Monica, California, Activision Blizzard, Inc. is a worldwide online, PC, console and handheld game publisher with leading positions across every major category of the rapidly growing interactive entertainment software industry.

Activision Blizzard maintains operations in the U.S., Canada, the United Kingdom, France, Germany, Ireland, Italy, Sweden, Spain, Norway, Denmark, the Netherlands, Australia, Russia, South Korea, China, and the region of Taiwan.  More information about Activision Blizzard and its products can be found on the company's website, www.activisionblizzard.com.

Cautionary Note Regarding Forward-looking Statements:  Information in this press release that involves Activision Blizzard’s expectations, plans, intentions or strategies regarding the future, including statements under the heading “Company Outlook,” are forward-looking statements that are not facts and involve a number of risks and uncertainties.  Activision Blizzard generally uses words such as “outlook,” “will,” “remains,” “to be,” “plans,” “believes,” “may,” “expects,” “intends,” and similar expressions to identify forward-looking statements.  

Factors that could cause Activision Blizzard’s actual future results to differ materially from those expressed in the forward-looking statements set forth in this release include, but are not limited to, sales levels of Activision Blizzard’s titles, shifts in consumer spending trends, the impact of the current macroeconomic environment, the seasonal and cyclical nature of the interactive game market, any further difficulties related to World of Warcraft in China, Activision Blizzard’s ability to predict consumer preferences among competing hardware platforms, declines in software pricing, product returns and price protection, product delays, retail acceptance of Activision Blizzard’s products, competition from the used game market, adoption rate and availability of new hardware (including peripherals) and related software, industry competition and competition from other forms of entertainment, rapid changes in technology, industry standards and consumer preferences including interest in specific genres such as music, first-person action and massively multiplayer online games, protection of proprietary rights, litigation against Activision Blizzard, maintenance of relationships with key personnel, customers, licensees, licensors, vendors, and third-party developers, counterparty risks relating to customers, licensees, licensors and manufacturers, domestic and international economic, financial and political conditions and policies, foreign exchange rates and tax rates, and the identification of suitable future acquisition opportunities, and the other  factors  identified in the risk factors sections of Activision Blizzard’s annual report on Form 10-K for the year ended December 31, 2008 and subsequently filed quarterly reports on Form 10-Q.  The forward-looking statements in this release are based upon information available to Activision Blizzard as of the date of this release, and Activision Blizzard assumes no obligation to update any such forward-looking statements.  Forward-looking statements believed to be true when made may ultimately prove to be incorrect.  These statements are not guarantees of the future performance of Activision Blizzard and are subject to risks, uncertainties and other factors, some of which are beyond its control and may cause actual results to differ materially from current expectations.

(Tables to Follow)

    
    
    ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES                                
    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS                           
    (Unaudited)                                                               
    (Amounts in millions, except per share data)                              
                                                                              
                                                Three months         Year     
                                                    ended           ended   
                                                 December 31,    December 31, 
                                                -------------   ------------- 
                                                 2009  2008(1)   2009  2008(1)
                                                 ----  ------    ----  ------ 
                                                                              
    Net revenues:                                                             
      Product sales                            $1,232  $1,319  $3,080  $1,872 
      Subscription, licensing and other                                       
       revenues                                   325     320   1,199   1,154 
      ---------------------------------           ---     ---   -----   ----- 
           Total net revenues                   1,557   1,639   4,279   3,026 
      -----------------------                   -----   -----   -----   ----- 
                                                                              
    Costs and expenses:                                                       
      Cost of sales - product costs               670     805   1,432   1,160 
      Cost of sales - software royalties and                                  
       amortization                               136     179     348     267 
      Cost of sales - intellectual property                                   
       licenses                                   152     174     315     219 
      Cost of sales - massively multi-player                                  
       online role playing game ("MMORPG")         54      53     212     193 
      Product development                         265     196     627     592 
      Sales and marketing                         215     244     544     464 
      General and administrative                   94     104     395     271 
      Impairment of intangible assets             409       -     409       - 
      Restructuring                                (6)     32      23      93 
      -------------                               ---     ---     ---     --- 
           Total costs and expenses             1,989   1,787   4,305   3,259 
      -----------------------------             -----   -----   -----   ----- 
    Operating loss                               (432)   (148)    (26)   (233)
    Investment and other income (loss), net        (3)     18      18      46 
    ---------------------------------------       ---     ---     ---     --- 
    Loss before income tax benefit               (435)   (130)     (8)   (187)
    Income tax benefit                           (149)    (58)   (121)    (80)
    ------------------                           ----     ---    ----     --- 
    Net income (loss)                           $(286)   $(72)   $113   $(107)
    =================                           =====    ====    ====   ===== 
                                                                              
                                                                              
    Basic earnings (loss) per common share     $(0.23) $(0.05)  $0.09  $(0.11)
    Weighted average common shares outstanding  1,265   1,326   1,283     946 
                                                                              
    
    Diluted earnings (loss) per common share   $(0.23) $(0.05)  $0.09  $(0.11)
    Weighted average common shares                                            
     outstanding assuming dilution              1,265   1,326   1,311     946 
                                                                              
                                                                              
    (1) On July 9, 2008, a business combination (the “Business Combination”) 
        by and among Activision, Inc., Sego Merger Corporation, a 
        wholly-owned subsidiary of Activision, Inc., Vivendi S.A. 
        (“Vivendi”), VGAC LLC, a wholly-owned subsidiary of Vivendi (“VGAC”), 
        and Vivendi Games, Inc., a wholly-owned subsidiary of VGAC (“Vivendi 
        Games” or "VG"), was consummated.  As a result of the consummation of 
        the Business Combination, Activision, Inc. was renamed Activision 
        Blizzard, Inc. 
    
        For accounting purposes, because the Business Combination resulted in 
        Vivendi obtaining control of Activision, Inc. through the acquisition 
        of a majority of common stock of Activision, Inc., the Business 
        Combination was treated as a “reverse acquisition,” with Vivendi 
        Games deemed to be the acquirer.  As a result, (i) the historical 
        financial statements of the company prior to July 10, 2008 are those 
        of Vivendi Games, Inc. and (ii) the results of Activision, Inc. prior 
        to July 10, 2008 are not included as part of the company’s historical 
        financial statements. 
    
        Further, earnings (loss) per share for periods prior to the Business 
        Combination are retrospectively adjusted to reflect the number of 
        equivalent shares received by Vivendi, former parent of Vivendi 
        Games, Inc. 
    
    
    ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES                                
    CONDENSED CONSOLIDATED BALANCE SHEETS                                     
    (Unaudited)                                                               
    (Amounts in millions)                                                     
    ---------------------                                                     
                                                     December 31, December 31,
                                                           2009     2008(2)   
    ------                                                 ----     ------    
    ASSETS                                                                    
    ------                                                                    
      Current assets:                                                         
        Cash and cash equivalents                        $2,768        $2,958 
        Short-term investments                              477            44 
        Accounts receivable, net                            739           974 
        Inventories                                         241           262 
        Software development                                224           235 
        Intellectual property licenses                       55            35 
        Deferred income taxes, net                          498           536 
        Intangible assets, net                                -            14 
        Other current assets                                327           201 
        --------------------                                ---           --- 
             Total current assets                         5,329         5,259 
        -------------------------                         -----         ----- 
      Long-term investments                                  23            78 
      Software development                                   10             1 
      Intellectual property licenses                         28             5 
      Property and equipment, net                           138           149 
      Other assets                                            9            30 
      Intangible assets, net                                618         1,283 
      Trademark and trade names                             433           433 
      Goodwill                                            7,154         7,227 
      --------                                            -----         ----- 
                       Total assets                     $13,742       $14,465 
      =============================                     =======       ======= 
                                                                              
    ------------------------------------                                      
    LIABILITIES AND SHAREHOLDERS’ EQUITY                                      
    ------------------------------------                                      
      Current liabilities:                                                    
        Accounts payable                                   $302          $319 
        Deferred revenues                                 1,426           923 
        Accrued expenses and other liabilities              779           842 
        --------------------------------------              ---           --- 
              Total current liabilities                   2,507         2,084 
        -------------------------------                   -----         ----- 
        Deferred income taxes, net                          270           615 
        Other liabilities                                   209           239 
        -----------------                                   ---           --- 
                     Total liabilities                    2,986         2,938 
      --------------------------------                    -----         ----- 
                                                                              
      Shareholders’ equity:                                                   
        Common stock                                          -             - 
        Additional paid-in capital                       12,376        12,170 
        Treasury stock                                   (1,235)         (126)
        Accumulated deficit                                (361)         (474)
        Accumulated other comprehensive loss                (24)          (43)
        ------------------------------------                ---           --- 
              Total shareholders’ equity                 10,756        11,527 
        --------------------------------                 ------        ------ 
                  Total liabilities and shareholders’                         
                   equity                               $13,742       $14,465 
        =================                               =======       ======= 
                                                                              
                                                                              
    (2) As previously reported in our September 30, 2009 Form 10-Q, 
        the December 31, 2008 condensed consolidated balance sheet has 
        been adjusted to reflect the correction of an immaterial error 
        related to the elimination of intercompany receivables and payables.
        The adjustment reduced accounts receivable and accounts payable in
        the December 31, 2008 condensed consolidated balance sheet by 
        approximately $236 million, and had no impact on net income, earnings
        per share, working capital or net cash flow.  This correction will 
        be made upon filing of our annual report on Form 10-K for the year
        ended December 31, 2009.    
    
    
    ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES                                
    RECONCILIATION OF GAAP NET INCOME (LOSS) TO NON-GAAP MEASURES             
    (Amounts in millions, except earnings (loss) per share data)              
                                                                              
                                                     Cost of         Cost of  
                                        Cost of      Sales -         Sales -  
                                        Sales -      Software     Intellectual
    Three months ended           Net    Product   Royalties and     Property  
     December 31, 2009         Revenues   Costs    Amortization      Licenses 
    --------------------------------------------------------------------------
      GAAP Measurement           $1,557    $670          $136           $152 
        Less:  Net effect from                                    
         deferral in net                                           
         revenues and related                                        
         cost of sales(a)           938     194            16              4 
        Less:  Stock-based                                            
         compensation (including                                      
         purchase price                                             
         accounting related                                        
         adjustments)(b)              -       -           (16)             - 
        Less:  Costs related to                                      
         the Business                                             
         Combination,                                                 
         integration and                                              
         restructuring(c)             -       -             -              - 
        Less:  Amortization of                                         
         intangible assets and                                        
         purchase price                                                 
         accounting related                                           
         adjustments(d)               -      (1)          (29)          (112)
        Less:  Impairment of                                          
         intangible assets(e)         -       -             -              - 
                                    ---     ---           ---            --- 
      Non-GAAP Measurement       $2,495    $863          $107            $44 
    ------------------------     ======    ====          ====            === 
    
    
                              Cost of                                        
    Three months ended        Sales -    Product    Sales and    General and 
     December 31, 2009         MMORPG  Development   Marketing  Administrative
    --------------------------------------------------------------------------
      GAAP Measurement             $54       $265        $215           $94 
        Less:  Net effect from                                               
         deferral in net                                                     
         revenues and related                                                
         cost of sales(a)            -          -           -             - 
        Less:  Stock-based                                                   
         compensation                                                        
         (including purchase                                                 
         price accounting                                                    
         related                                                             
         adjustments)(b)             -        (12)          1           (20)
        Less:  Costs related                                                
         to the Business                                                    
         Combination,                                                       
         integration and                                                    
         restructuring(c)            -          -           -             - 
        Less:  Amortization of                                              
         intangible assets and                                              
         purchase price                                                     
         accounting related                                                 
         adjustments(d)              -          -           -             - 
        Less:  Impairment of                                                
         intangible assets(e)        -          -           -             - 
                                   ---        ---         ---           --- 
      Non-GAAP Measurement         $54       $253        $216           $74 
    ------------------------       ===       ====        ====           === 
    
                                                                          
                                                                          
                                Impairment                                
    Three months ended        of Intangible                  Total Costs  
     December 31, 2009            Assets      Restructuring  and Expenses 
    ---------------------------------------------------------------------
      GAAP Measurement                $409           $(6)       $1,989 
        Less:  Net effect from                                             
         deferral in net                                                  
         revenues and related                                             
         cost of sales(a)                -             -           214 
        Less:  Stock-based                                                
         compensation                                                     
         (including purchase                                              
         price accounting                                                 
         related                                                          
         adjustments)(b)                 -             -           (47)
        Less:  Costs related                                              
         to the Business                                                  
         Combination,                                                     
         integration and                                                  
         restructuring(c)                -             6             6 
        Less:  Amortization of                                             
         intangible assets and                                             
         purchase price                                                    
         accounting related                                                
         adjustments(d)                  -             -          (142)
        Less:  Impairment of                                               
         intangible assets(e)         (409)            -          (409)
                                      ----           ---          ---- 
      Non-GAAP Measurement              $-            $-        $1,611 
    ------------------------           ===           ===        ====== 
    
    
                                                        Basic          Diluted
                                             Net       Earnings       Earnings
    Three months ended        Operating    Income       (Loss)         (Loss)
     December 31, 2009       Income (Loss)  (Loss)     per Share     per Share
    --------------------------------------------------------------------------
      GAAP Measurement          $(432)      $(286)     $(0.23)         $(0.23)
        Less:  Net effect                                            
         from deferral in net                                        
         revenues and related                                        
         cost of sales(a)         724         552        0.43            0.43 
        Less:  Stock-based                                          
         compensation                                                  
         (including purchase                                          
         price accounting                                                   
         related                                                             
         adjustments)(b)           47          29        0.02            0.02 
        Less:  Costs related                                            
         to the Business                                                  
         Combination,                                                    
         integration and                                                
         restructuring(c)          (6)         (4)      (0.00)          (0.00)
        Less:  Amortization                                             
         of intangible assets                                           
         and purchase price                                             
         accounting related                                             
         adjustments(d)           142          92        0.07            0.07 
        Less:  Impairment of                                           
         intangible assets(e)     409         249        0.19            0.19 
                                  ---         ---        ----            ---- 
      Non-GAAP Measurement       $884        $632       $0.50           $0.49 
    ----------------------       ====        ====       =====           ===== 
    
    
                                                     Cost of         Cost of 
                                        Cost of      Sales -         Sales -  
                                        Sales -      Software     Intellectual
    Year ended December 31,     Net     Product    Royalties and     Property
     2009                     Revenues   Costs     Amortization      Licenses
    --------------------------------------------------------------------------
      GAAP Measurement         $4,279    $1,432         $348           $315 
        Less:  Net effect from                                 
         deferral in net                                      
         revenues and related                                
         cost of sales(a)         497       115           (4)            (2)
        Less:  Stock-based                                     
         compensation                                          
         (including purchase                                
         price accounting                                       
         related                                               
         adjustments)(b)            -         -          (34)             - 
        Less:  Results of                                         
         Activision Blizzard's                                     
         non-core exit                                                
         operations(f)             (1)        -            -              - 
        Less:  Costs related                                         
         to the Business                                             
         Combination,                                                  
         integration and                                                
         restructuring(c)           -         -            -              - 
        Less:  Amortization of                                         
         intangible assets and                                      
         purchase price                                                  
         accounting related                                            
         adjustments(d)             -        (5)         (66)          (186)
        Less:  Impairment of                                         
         intangible assets(e)       -         -            -              - 
                                  ---       ---          ---            --- 
      Non-GAAP Measurement     $4,775    $1,542         $244           $127 
    ------------------------   ======    ======         ====           ==== 
    
    
                              Cost of                                        
    Year ended December 31,   Sales -    Product    Sales and     General and
     2009                     MMORPG  Development   Marketing   Administrative
    --------------------------------------------------------------------------
      GAAP Measurement           $212      $627        $544            $395 
        Less:  Net effect from                                               
         deferral in net                                                     
         revenues and related                                                
         cost of sales(a)           -         -           5               - 
        Less:  Stock-based                                                   
         compensation                                                        
         (including purchase                                                 
         price accounting                                                    
         related                                                             
         adjustments)(b)            -       (40)         (9)            (71)
        Less:  Results of                                                    
         Activision Blizzard's                                               
         non-core exit                                                       
         operations(f)              -         4          (3)            (10)
        Less:  Costs related                                                 
         to the Business                                                     
         Combination,                                                        
         integration and                                                     
         restructuring(c)           -         -           -             (24)
        Less:  Amortization of                                               
         intangible assets and                                               
         purchase price                                                      
         accounting related                                                  
         adjustments(d)             -         -           -              (2)
        Less:  Impairment of                                                 
         intangible assets(e)       -         -           -               - 
                                  ---       ---         ---             --- 
      Non-GAAP Measurement       $212      $591        $537            $288 
    ------------------------     ====      ====        ====            ==== 
    
    
                                                                          
                                                                          
                                Impairment                                
    Year ended December 31,   of Intangible                  Total Costs  
     2009                         Assets      Restructuring  and Expenses 
    ---------------------------------------------------------------------
      GAAP Measurement             $409            $23          $4,305 
        Less:  Net effect from                                        
         deferral in net                                             
         revenues and related                                        
         cost of sales(a)             -              -             114 
        Less:  Stock-based                                           
         compensation                                                
         (including purchase                                         
         price accounting                                            
         related                                                     
         adjustments)(b)              -              -            (154)
        Less:  Results of                                            
         Activision Blizzard's                                        
         non-core exit                                               
         operations(f)                -              -              (9)
        Less:  Costs related                                         
         to the Business                                             
         Combination,                                                
         integration and                                             
         restructuring(c)             -            (23)            (47)
        Less:  Amortization of                                        
         intangible assets and                                        
         purchase price                                               
         accounting related                                           
         adjustments(d)               -              -            (259)
        Less:  Impairment of                                          
         intangible assets(e)      (409)             -            (409)
                                   ----            ---            ---- 
      Non-GAAP Measurement           $-             $-          $3,541 
    ------------------------        ===            ===          ====== 
    
    
                                                          Basic       Diluted
    Year ended December 31,     Operating      Net       Earnings    Earnings
     2009                    Income (Loss)   Income     per Share   per Share
    -------------------------------------------------------------------------
      GAAP Measurement             $(26)      $113          $0.09      $0.09
        Less:  Net effect                                                  
         from deferral in net                                              
         revenues and related                                              
         cost of sales(a)           383        279           0.22       0.21
        Less:  Stock-based                                                 
         compensation                                                      
         (including purchase                                               
         price accounting                                                  
         related                                                           
         adjustments)(b)            154         96           0.07       0.07
        Less:  Results of                                                  
         Activision Blizzard's                                              
         non-core exit                                                     
         operations(f)                8          4           0.00       0.00
        Less:  Costs related                                               
         to the Business                                                   
         Combination,                                                      
         integration and                                                   
         restructuring(c)            47         28           0.02       0.02
        Less:  Amortization                                                
         of intangible assets                                              
         and purchase price                                                
         accounting related                                                
         adjustments(d)             259        141           0.11       0.11
        Less:  Impairment of                                               
         intangible assets(e)       409        249           0.19       0.19
                                    ---        ---           ----       ----
      Non-GAAP Measurement       $1,234       $910          $0.70      $0.69
    ----------------------       ======       ====          =====      =====
                                                                          
                                                                          
                                                                          
      (a) Reflects the net change in deferred net revenues and related cost 
          of sales.    
      (b) Includes expense related to stock-based compensation.      
      (c) Reflects costs related to the Business Combination with Vivendi 
          Games (including transaction costs, integration costs and 
          restructuring activities). Restructuring activities includes 
          severance costs, facility exit costs and balance sheet write down 
          and exit costs from the cancellation of projects.    
      (d) Reflects amortization of intangible assets, and the change in the 
          fair value of assets and liabilities from purchase price accounting 
          related adjustments.    
      (e) Reflects impairment of intangible assets acquired as a result of 
           purchase price accounting.    
      (f) Reflects the results of products and operations from the historical 
          Vivendi Games businesses that the company has exited, divested or 
          wound down.    
    
      The per share adjustments are presented as calculated, and the GAAP and 
      non-GAAP earnings (loss) per share information is also presented as 
      calculated. The sum of these measures, as presented, may differ due to 
      the impact of rounding.    
    
    
    ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES                     
    RECONCILIATION OF GAAP NET INCOME (LOSS) TO NON-GAAP MEASURES       
    (Amounts in millions, except earnings (loss) per share data)        
                                                              
                                                 Cost of     Cost of          
                                                 Sales -     Sales -          
                                    Cost of     Software     Intell-          
                                    Sales -     Royalties    ectual    Cost of
    Three Months ended      Net     Product    and Amorti-  Property   Sales -
     December 31, 2008    Revenues   Costs      zation      Licenses   MMORPG
    --------------------------------------------------------------------------
      GAAP Measurement      $1,639     $805        $179       $174       $53
        Less:  Net effect                                                    
         from deferral in net                                                
         revenues and related                                                
         cost of sales(a)      705      135          61         19         -
        Less:  Stock-based                                                   
         compensation                                                        
         (including purchase                                                 
         price accounting                                                    
         related                                                             
         adjustments)(b)         -        -          (4)         -         -
        Less:  Results of                                                    
         Activision                                                          
         Blizzard's non-core                                                 
         exit                                                                
         operations(c)          (1)       -           -          -         -
        Less:  Costs related                                                 
         to the Business                                                     
         Combination,                                                        
         integration and                                                     
         restructuring(d)        -        -           -          -         -
        Less:  Amortization                                                  
         of intangible assets                                                
         and purchase price                                                  
         accounting related                                                  
         adjustments(e)          -       (7)        (71)      (118)        -
                               ---      ---         ---       ----       ---
      Non-GAAP                                                              
       Measurement          $2,343     $933        $165        $75       $53
    ----------------        ======     ====        ====        ===       ===
    
    
                                               General and             Total
    Three Months ended     Product    Sales and  Admini-   Restruc-  Costs and
     December 31, 2008   Development  Marketing  strative   turing    Expenses
    --------------------------------------------------------------------------
      GAAP Measurement      $196        $244       $104       $32      $1,787 
        Less:  Net effect                                            
         from deferral in                                               
         net revenues and                                            
         related cost of                                            
         sales(a)              -           -          -         -         215 
        Less:  Stock-based                                             
         compensation                                             
         (including purchase                                          
         price accounting                                               
         related                                                       
         adjustments)(b)     (10)         (4)       (25)        -         (43)
        Less:  Results of                                            
         Activision                                                 
         Blizzard's non-core                                       
         exit                                                       
         operations(c)       (10)         (3)        (3)        -         (16)
        Less:  Costs                                                  
         related to the                                           
         Business                                                  
         Combination,                                             
         integration and                                         
         restructuring(d)      -           -        (11)      (32)        (43)
        Less:  Amortization                                     
         of intangible                                            
         assets and purchase                                         
         price accounting                                         
         related                                               
         adjustments(e)        -          (4)        (1)        -        (201)
                             ---         ---        ---       ---        ---- 
      Non-GAAP                                                   
       Measurement          $176        $233        $64        $-      $1,699 
    ----------------        ====        ====        ===       ===      ====== 
    
    
                                                                      Diluted  
                                                        Basic         Earnings
    Three Months ended      Operating    Net Income   Earnings (Loss)  (Loss)
     December 31, 2008     Income (Loss)    (Loss)     per Share     per Share
    --------------------------------------------------------------------------
      GAAP Measurement         $(148)        $(72)       $(0.05)     $(0.05)
        Less:  Net effect                                        
         from deferral in                                           
         net revenues and                                         
         related cost of                                              
         sales(a)                490          313          0.24        0.23 
        Less:  Stock-based                                          
         compensation                                             
         (including                                                  
         purchase price                                            
         accounting related                                          
         adjustments)(b)          43           26          0.02        0.02 
        Less:  Results of                                              
         Activision                                                      
         Blizzard's non-                                               
         core exit                                                    
         operations(c)            15           11          0.01        0.01 
        Less:  Costs                                                 
         related to the                                              
         Business                                                       
         Combination,                                                
         integration and                                              
         restructuring(d)         43           30          0.02        0.02 
        Less:                                                         
         Amortization of                                                
         intangible assets                                            
         and purchase price                                        
         accounting related                                        
         adjustments(e)          201          121          0.09        0.09 
                                 ---          ---          ----        ---- 
      Non-GAAP Measurement      $644         $429         $0.32       $0.31 
    --------------              ====         ====         =====       ===== 
                                                                
       (a) Reflects the net change in deferred net revenues and related cost 
           of sales.     
       (b) Includes expense related to stock-based compensation.     
       (c) Reflects the results of products and operations from the 
           historical Vivendi Games businesses that the company has exited, 
           divested or wound down.     
       (d) Reflects costs related to the Business Combination with Vivendi 
           Games (including transaction costs, integration costs and 
           restructuring activities). Restructuring activities includes 
           severance costs, facility exit costs and balance sheet write down 
           and exit costs from the cancellation of projects.    
       (e) Reflects amortization of intangible assets, and the change in the 
           fair value of assets and liabilities from purchase price accounting 
           related adjustments.     
    
       The per share adjustments are presented as calculated, and the GAAP 
       and non-GAAP earnings (loss) per share information is also presented 
       as calculated. The sum of these measures, as presented, may differ due 
       to the impact of rounding.     
    
    
    ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES                     
    FINANCIAL INFORMATION                                               
    For the Three Months and Year Ended December 31, 2009 and 2008        
    (Amounts in millions)                                            
                                                                 
                                      Three Months Ended                 
                                    ----------------------                   
                           December 31, 2009     December 31, 2008     
                          Amount  % of Total    Amount  % of Total  Difference 
    -------------------  -------------------   -------------------  ----------
    GAAP Net Revenues by
     Segment/Platform Mix                                          
    Activision and
     Blizzard:                                  
      MMORPG                $294        19%       $325        20%       $(31)
      PC and other            60         4          49         3          11 
        Sony PlayStation  3  228        15         163        10          65 
        Sony PlayStation  2   53         3         205        13        (152)
        Microsoft Xbox 360   324        21         273        17          51 
        Nintendo Wii         260        17         317        19         (57)
                             ---       ---         ---       ---         --- 
      Total console          865        56         958        59         (93)
        Sony PlayStation                                    
         Portable             16         1          17         1          (1)
        Nintendo Dual                                              
         Screen              101         6         118         7         (17)
                             ---       ---         ---       ---         --- 
      Total handheld         117         7         135         8         (18)
      --------------         ---       ---         ---       ---         --- 
      Total Activision and                                          
       Blizzard            1,336        86       1,467        90        (131)
      ------------------   -----       ---       -----       ---        ---- 
                                                                  
    Distribution:                                               
      Total Distribution     221        14         171        10          50 
      ------------------     ---       ---         ---       ---         --- 
      Total net revenues                                         
       core operations     1,557       100       1,638       100         (81)
                                                               
      Other                    -         -           1         -          (1)
      -----                  ---       ---         ---       ---         --- 
      Total consolidated                                        
       GAAP net revenues  $1,557       100%     $1,639       100%       $(82)
      ------------------  ------       ---      ------       ---        ---- 
                                                                      
    Changes in Deferred Net
     Revenues(1)                             
    Activision and Blizzard:                                   
      MMORPG                 $(4)                 $137                 $(141)
      PC and other            92                    33                    59 
        Sony PlayStation  3  343                   169                   174 
        Microsoft Xbox 360   429                   247                   182 
        Nintendo Wii          78                   119                   (41)
                             ---                   ---                   --- 
      Total Console          850                   535                   315 
                             ---                   ---                   --- 
      Total changes in                                               
       deferred net                                              
       revenues              938                   705                   233 
                             ---                   ---                   --- 
                                                       
    Other(1)                  $-                   $(1)                   $1 
                             ---                   ---                   --- 
                                                                   
    Non-GAAP Net Revenues by
     Segment/Platform Mix                                      
    Activision and
     Blizzard:                                     
      MMORPG                $290        11%       $462        20%      $(172)
      PC and other           152         6          82         3          70 
        Sony PlayStation  3  571        23         332        14         239 
        Sony PlayStation  2   53         2         205         9        (152)
        Microsoft Xbox 360   753        30         520        22         233 
        Nintendo Wii         338        14         436        19         (98)
                             ---       ---         ---       ---         --- 
      Total console        1,715        69       1,493        64         222 
        Sony PlayStation                                          
         Portable             16         1          17         1          (1)
        Nintendo Dual                                          
         Screen              101         4         118         5         (17)
                             ---       ---         ---       ---         --- 
      Total handheld         117         5         135         6         (18)
      --------------         ---       ---         ---       ---         --- 
      Total Activision and                                      
       Blizzard            2,274        91       2,172        93         102 
      ------------------   -----       ---       -----       ---         --- 
                                                                    
      Total Distribution     221         9         171         7          50 
      ------------------     ---       ---         ---       ---         --- 
      Total non-GAAP net                                 
       revenues(2)        $2,495       100%     $2,343       100%       $152 
      -----------------   ------       ---      ------       ---        ---- 
                                                              
                                                              
                                                            
                                                   Year Ended              
                                                 --------------            
                                              December 31, 2009              
                                              Amount    % of Total           
                                             ----------------------          
    GAAP Net Revenues by Segment/Platform Mix                 
    Activision and Blizzard:                                  
      MMORPG                                   $1,233          29%           
      PC and other                                179           4            
        Sony PlayStation  3                       584          14            
        Sony PlayStation  2                       174           4            
        Microsoft Xbox 360                        857          19            
        Nintendo Wii                              584          14            
                                                  ---         ---            
      Total console                             2,199          51            
        Sony PlayStation                                      
         Portable                                  48           1            
        Nintendo Dual                                         
         Screen                                   196           5            
                                                  ---         ---            
      Total handheld                              244           6            
      --------------                              ---         ---            
      Total Activision and                                    
       Blizzard                                 3,855          90            
      --------------------                      -----         ---            
                                                              
    Distribution:                                             
      Total Distribution                          423          10            
      ------------------                          ---         ---            
      Total net revenues                                      
       core operations                          4,278         100            
                                                              
      Other                                         1           -            
      -----                                       ---         ---            
      Total consolidated                                      
       GAAP net revenues                       $4,279         100%           
      ------------------                       ------         ---            
                                                              
    Changes in Deferred Net Revenues(1)                        
    Activision and Blizzard:                                  
      MMORPG                                    $(118)                       
      PC and other                                 74                        
        Sony PlayStation  3                       259                        
        Microsoft Xbox 360                        284                        
        Nintendo Wii                               (2)                       
                                                  ---                        
      Total Console                               541                        
                                                  ---                        
      Total changes in                                        
       deferred net                                           
       revenues                                   497                        
                                                  ---                        
                                                              
    Other(1)                                      $(1)                       
                                                  ---                        
                                                              
    Non-GAAP Net Revenues by Segment/Platform Mix             
    Activision and Blizzard:                                  
      MMORPG                                   $1,115          23%           
      PC and other                                253           5            
        Sony PlayStation  3                       843          18            
        Sony PlayStation  2                       174           4            
        Microsoft Xbox 360                      1,141          24            
        Nintendo Wii                              582          12            
                                                  ---         ---            
      Total console                             2,740          58            
        Sony PlayStation                                      
         Portable                                  48           1            
        Nintendo Dual                                         
         Screen                                   196           4            
                                                  ---         ---            
      Total handheld                              244           5            
      --------------                              ---         ---            
      Total Activision and                                    
       Blizzard                                 4,352          91            
      --------------------                      -----         ---            
                                                              
      Total Distribution                          423           9       
      ------------------                          ---         ---      
      Total non-GAAP net                                      
       revenues(2)                             $4,775         100%     
      -------------------                      ------         ---       
                                                              
                                                              
      (1) We provide net revenues including (in accordance with GAAP) and 
          excluding (non-GAAP) the impact of changes in deferred net revenues 
          and other.                 
      (2) Total non-GAAP net revenues presented also represents our total 
          operating segments net revenues.                            
    
    
    ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES               
    FINANCIAL INFORMATION                                       
    For the Three Months and Year Ended December 31, 2009 and 2008        
    (Amounts in millions)                                     
                                                     
                                                            
                                                     
                                     Three Months Ended                       
                                   ----------------------                
                           December 31, 2009    December 31, 2008   
                         Amount    % of Total   Amount  % of Total  Difference
                         --------------------  -------------------- ----------
    GAAP Net Revenues by                                            
     Geographic Region                                         
      North America         $759        49%       $903        55%      $(144)
      Europe                 710        46         660        40          50 
      Asia Pacific            88         5          75         5          13 
      ------------           ---       ---         ---       ---         --- 
      Total net revenues                                             
       core operations     1,557       100       1,638       100         (81)
                                                                      
      Other                    -         -           1         -          (1)
      -----                  ---       ---         ---       ---         --- 
      Total consolidated                                     
       GAAP net revenues  $1,557       100%     $1,639       100%       $(82)
      ------------------  ------       ---      ------       ---        ---- 
                                                                      
    Changes in Deferred                                            
     Net Revenues(1)                                              
      North America         $528                  $443                   $85 
      Europe                 371                   241                   130 
      Asia Pacific            39                    21                    18 
      ------------           ---                   ---                   --- 
      Total changes in net                                           
       revenues              938                   705                   233 
                             ---                   ---                   --- 
                                                                         
    Other(1)                  $-                   $(1)                   $1 
                             ---                   ---                   --- 
                                                                  
                                                                  
    Non-GAAP Net Revenues                                     
     by Geographic Region                                         
      North America       $1,287        52%     $1,346        58%       $(59)
      Europe               1,081        43         901        38         180 
      Asia Pacific           127         5          96         4          31 
      ------------           ---       ---         ---       ---         --- 
      Total non-GAAP net                                                
       revenues(2)        $2,495       100%     $2,343       100%       $152 
      ------------------  ------       ---      ------       ---        ---- 
                                                           
                                                           
                                                           
                                                      Year Ended          
                                                    --------------         
                                                   December 31, 2009      
                                                 Amount    % of Total     
    ------                                       --------------------    
    GAAP Net Revenues by                                   
     Geographic Region                                     
      North America                              $2,217          52%    
      Europe                                      1,798          42     
      Asia Pacific                                  263           6     
      ------------                                  ---         ---     
      Total net revenues                                   
       core operations                            4,278         100     
                                                           
      Other                                           1           -      
      -----                                         ---         ---      
      Total consolidated                                   
       GAAP net revenues                         $4,279         100%     
      ------------------                         ------         ---         
                                                           
    Changes in Deferred                                    
     Net Revenues(1)                                        
      North America                                $241                  
      Europe                                        224                     
      Asia Pacific                                   32                     
      ------------                                  ---                  
      Total changes in net                                 
       revenues                                     497                  
                                                    ---                   
                                                           
    Other(1)                                        $(1)                  
                                                    ---                   
                                                           
                                                           
    Non-GAAP Net Revenues                                  
     by Geographic Region                                  
      North America                              $2,458          52%      
      Europe                                      2,022          42         
      Asia Pacific                                  295           6         
      ------------                                  ---         ---         
      Total non-GAAP net                                   
       revenues(2)                               $4,775         100%        
      -------------------                        ------         ---         
                                                           
                                                           
      (1) We provide net revenues including (in accordance with GAAP) and 
          excluding (non-GAAP) the impact of changes in deferred net revenues 
          and other.                     
      (2) Total non-GAAP net revenues presented also represents our total 
          operating segments net revenues.                               
    
    
    ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
    For the Three Months Ended December 31, 2009 and 2008
    GAAP to Non-GAAP Reconciliations
    Segment Information - Comparable Basis Net Revenues (Amounts in millions)
    
                                                                     Segments/
                                                     Distri-          Consol-
    Three months ended        Activision  Blizzard   bution   Core    idated
     December 31, 2009            (i)       (ii)     (iii)    (iv)    Total
                              ----------  --------  -------  ------  --------
    Segment net revenues        $1,945      $329     $221    $2,495   $2,495
    
    Reconciliation to GAAP
     consolidated net revenues
       - Net effect from
         deferral of net revenues                                       (938)
                                                                        -----
    Consolidated net
     revenues (GAAP)                                                  $1,557
    ---------------------------------------------------------------
    Non-GAAP Comparable
     Basis Segment
     Net Revenues               $1,945      $329     $221    $2,495
    ---------------------------------------------------------------
    
                                                                     Segments/
                                                     Distri-          Consol-
    Three months ended        Activision  Blizzard   bution   Core    idated
     December 31, 2008            (i)       (ii)     (iii)    (iv)    Total
                              ----------  --------  -------  ------  --------
    Segment net revenues        $1,695      $477     $171    $2,343   $2,343
    
    Reconciliation to GAAP
     consolidated net revenues
       - Net effect from
         deferral of net revenues                                       (705)
       - Other (v)                                                         1
                                                                        -----
    Consolidated net
     revenues (GAAP)                                                  $1,639
    ---------------------------------------------------------------
    Non-GAAP Comparable
     Basis Segment
     Net Revenues               $1,695      $477     $171    $2,343
    ---------------------------------------------------------------
    - Change in Comparable
     Basis -- Three Months
     Ended December 31,
     2009 vs. 2008                                                6%
    ---------------------------------------------------------------
    
    (i)   Activision Publishing ("Activision") -- publishes interactive
          entertainment software and peripherals, which includes the
          Activision business conducted by Activision, Inc. prior to the
          business combination and certain studios, assets, and titles
          previously included in Vivendi Games’ "Sierra Entertainment"
          operating segment prior to the business combination.
    (ii)  Blizzard -- Blizzard Entertainment, Inc. and its subsidiaries
          ("Blizzard") publishes traditional games and online subscription-
          based games in the MMORPG category.
    (iii) Activision Blizzard Distribution ("Distribution") -- distributes
          interactive entertainment software and hardware products.
    (iv)  Activision, Blizzard and Distribution are referred to collectively
          as Activision Blizzard Inc.'s core operations ("Core").
    (v)   Other represents Non-Core activities, which are handled by certain
          functional departments of our Activision segment and are
          insignificant to Activision Blizzard's financial condition and
          results of operations. Prior to July 1, 2009, we operated a fourth
          operating segment, Non-Core, which represented legacy Vivendi Games'
          divisions or business units that the company had exited, divested,
          or wound down as part of our restructuring and integration efforts
          as a result of the Business Combination. As of July 1, 2009, in
          light of the decreasing significance of Non-Core activities, we
          ceased the management of Non-Core as a separate operating segment
          and consequently we are no longer providing separate operating
          segment disclosure with respect to Non-Core and have reclassified
          our prior period's segment presentation so that it conforms to the
          current period's presentation.
    
    
    
    ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
    For the Years Ended December 31, 2009 and 2008
    GAAP to Non-GAAP Reconciliations
    Segment Information - Comparable Basis Net Revenues (Amounts in millions)
    
                                                                     Segments/
                                                     Distri-          Consol-
    Year ended                Activision  Blizzard   bution   Core    idated
     December 31, 2009            (i)       (ii)     (iii)    (iv)    Total
                              ----------  --------  -------  ------  --------
    
    Segment net revenues        $3,156    $1,196     $423    $4,775   $4,775
    
    Reconciliation to GAAP
     consolidated net revenues
       - Net effect from
         deferral of net revenues                                       (497)
       - Other (v)                                                         1
                                                                        -----
    Consolidated
     net revenues (GAAP)                                              $4,279
    ---------------------------------------------------------------
    Non-GAAP Comparable
     Basis Segment
     Net Revenues               $3,156    $1,196     $423    $4,775
    ---------------------------------------------------------------
    
                                                                     Segments/
                                                     Distri-          Consol-
    Year ended                Activision  Blizzard   bution   Core    idated
     December 31, 2008            (i)       (ii)     (iii)    (iv)    Total
                              ----------  --------  -------  ------  --------
    
    Segment net revenues
     (VG Jan 1-Dec 31,
     Activision
     July 10-Dec 31)            $2,152    $1,343     $227    $3,722   $3,722
    
    Reconciliation to GAAP
     consolidated net revenues
       - Net effect from
         deferral of net revenues                                       (713)
       - Other (v)                                                        17
                                                                        -----
    Consolidated
     net revenues (GAAP)                                              $3,026
    
    Comparable Presentation
     Adjustments:
       Including Activision,
        Inc. prior period from
        July 1 to July 9, 2008
          Segment net revenues      35         -       18        53
    
       Including Activision,
        Inc. prior periods
        for the six months
        ended June 30, 2008
          Segment net revenues   1,092         -      165     1,257
    
    ---------------------------------------------------------------
    Non-GAAP Comparable Basis
     Segment Net Revenues       $3,279    $1,343     $410    $5,032
    ---------------------------------------------------------------
    - Change in Comparable
     Basis -- Year Ended
     December 31, 2009
     vs. 2008                                                    -5%
    ---------------------------------------------------------------
     
    (i)   Activision Publishing (“Activision”) -- publishes interactive
          entertainment software and peripherals, which includes the
          Activision business conducted by Activision, Inc. prior to the
          business combination and certain studios, assets, and titles
          previously included in Vivendi Games’ "Sierra Entertainment"
          operating segment prior to the business combination.
    (ii)  Blizzard -- Blizzard Entertainment, Inc. and its subsidiaries
          ("Blizzard") publishes traditional games and online subscription-
          based games in the MMORPG category.
    (iii) Activision Blizzard Distribution ("Distribution") -- distributes
          interactive entertainment software and hardware products.
    (iv)  Activision, Blizzard and Distribution are referred to collectively
          as Activision Blizzard Inc.’s core operations ("Core").
    (v)   Other represents Non-Core activities, which are handled by certain
          functional departments of our Activision segment and are
          insignificant to Activision Blizzard's financial condition and
          results of operations. Prior to July 1, 2009, we operated a fourth
          operating segment, Non-Core, which represented legacy Vivendi Games'
          divisions or business units that the company had exited, divested,
          or wound down as part of our restructuring and integration efforts
          as a result of the Business Combination. As of July 1, 2009, in
          light of the decreasing significance of Non-Core activities, we
          ceased the management of Non-Core as a separate operating segment
          and consequently we are no longer providing separate operating
          segment disclosure with respect to Non-Core and have reclassified
          our prior period's segment presentation so that it conforms to the
          current period's presentation.
    
    
    
    ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES                           
    For the Three Months Ended December 31, 2009 and 2008                 
    GAAP to Non-GAAP Reconciliations                         
    Segment Information - Comparable Basis Segment Operating Income (Loss) 
    (Amounts in millions)                         
                                                                     Segments/
                                                    Distri-           Consol- 
    Three months ended    Activision     Blizzard    bution   Core    idated
     December 31, 2009        (i)         (ii)       (iii)    (iv)     Total  
                           -----------  ---------   -------   -----   -------- 
    Segment operating                      
     income (loss)           $712         $162        $10      $884      $884 
                                              
    Reconciliation to GAAP                                       
     consolidated operating                                  
     income (loss)                                                 
      - Net effect                                  
         from deferral                                      
         of net revenues                                 
         and related                                    
         cost of sales                                                   (724)
      - Stock-based                                                  
         compensation expense                                             (47)
      - Restructuring                                         
         expense                                                            6 
      - Amortization of                                                       
         intangible assets                                            
         and purchase price                                           
         accounting related                                            
         adjustments                                                     (142)
      - Impairment of                                                  
         intangible assets                                               (409)
                                                             
                                                                        -----
    Consolidated operating                                      
     income (loss) (GAAP)                                               $(432)
                                                
    ---------------------------------------------------------------
    Non-GAAP                                                        
     Comparable Basis                                               
     Segment Operating                                           
     Income (Loss)           $712         $162        $10      $884    
    ---------------------------------------------------------------
                                                       
                                                                     Segments/
                                                    Distri-           Consol- 
    Three months ended    Activision     Blizzard    bution   Core    idated
     December 31, 2008        (i)          (ii)      (iii)    (iv)     Total  
                           -----------  ---------   -------   -----   -------- 
    Segment operating                          
     income (loss)           $368         $257        $19      $644      $644 
                                                          
    Reconciliation to GAAP                               
     consolidated operating                                      
     income (loss)                                             
      - Net effect                                       
         from deferral                                       
         of net revenues                                    
         and related                                      
         cost of sales                                                   (490)
      - Stock-based                                     
         compensation expense                                             (43)
      - Restructuring                                                
         expenses                                                         (32)
      - Amortization of                                         
         intangible assets                                  
         and purchase price                                   
         accounting related                                    
         adjustments                                                     (201)
      - Integration and                                               
         transaction costs                                                (11)
      - Other (v)                                                         (15)
                                                                          --- 
    Consolidated operating                                          
     income (loss) (GAAP)                                               $(148)
                                                    
    ---------------------------------------------------------------
    Non-GAAP                                            
     Comparable Basis                                    
     Segment Operating                 
     Income (Loss)           $368         $257        $19      $644 
    ---------------------------------------------------------------
    - Change in                                          
       Comparable Basis -                                 
       - Three Months                                       
       Ended December                                       
       31, 2009 vs. 2008                                         37%     
    ---------------------------------------------------------------
                                 
    (i)   Activision Publishing ("Activision") --  publishes interactive 
          entertainment software and peripherals, which includes the 
          Activision business conducted by Activision, Inc. prior to the 
          business combination and certain studios, assets, and titles 
          previously included in Vivendi Games’ "Sierra Entertainment" 
          operating segment prior to the business combination. 
    (ii)  Blizzard --  Blizzard Entertainment, Inc. and its subsidiaries 
          ("Blizzard") publishes traditional games and online 
          subscription-based games in the MMORPG category. 
    (iii) Activision Blizzard Distribution ("Distribution") -- distributes 
          interactive entertainment software and hardware products. 
    (iv)  Activision, Blizzard and Distribution are referred to collectively 
          as Activision Blizzard Inc.’s core operations ("Core"). 
    (v)   Other represents Non-Core activities, which are handled by certain 
          functional departments of our Activision segment and are 
          insignificant to Activision Blizzard's financial condition and 
          results of operations. Prior to July 1, 2009, we operated a fourth 
          operating segment, Non-Core, which represented legacy Vivendi 
          Games' divisions or business units that the company had exited, 
          divested, or wound down as part of our restructuring and integration 
          efforts as a result of the Business Combination. As of July 1, 2009, 
          in light of the decreasing significance of Non-Core activities, we 
          ceased the management of Non-Core as a separate operating segment 
          and consequently we are no longer providing separate operating 
          segment disclosure with respect to Non-Core and have reclassified 
          our prior period's segment presentation so that it conforms to the 
          current period's presentation. 
    
    
    
    ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
    For the Years Ended December 31, 2009 and 2008 
    GAAP to Non-GAAP Reconciliations 
    Segment Information - Comparable Basis Segment Operating Income (Loss)
    (Amounts in millions)   
    
                                                                    Segments/
                                                 Distri-             Consol-
    Year ended            Activision   Blizzard  bution     Core     idated
     December 31, 2009        (i)        (ii)     (iii)     (iv)     Total
                          ----------   --------  -------    ----    -------- 
    Segment operating
     income (loss)            $663       $555     $16      $1,234     $1,234
                         
    Reconciliation to GAAP
     consolidated operating 
     income (loss)         
      - Net effect from
        deferral of net
        revenues and related
        cost of sales                                                   (383)
      - Stock-based
        compensation expense                                            (154)
      - Restructuring expenses                                           (23)
      - Amortization of
        intangible assets
        and purchase price
        accounting
        related adjustments                                             (259)
      - Impairment of
        intangible assets                                               (409)
      - Integration and
        transaction costs                                                (24)
      - Other (v)                                                         (8)
                                                                        ----
    Consolidated operating
     income (loss) (GAAP)                                               $(26)
    -------------------------------------------------------------
    Non-GAAP Comparable
     Basis Segment Operating                                                
     Income (Loss)            $663       $555     $16      $1,234          
    -------------------------------------------------------------
                  
                                                                    Segments/
                                                 Distri-             Consol-
    Year ended            Activision   Blizzard  bution     Core     idated
     December 31, 2008        (i)        (ii)     (iii)     (iv)     Total
                          ----------   --------  -------    ----    -------- 
    Segment operating 
     income (loss)
     (VG Jan. 1-Dec 31,
     Activision 
     July 10-Dec 31)          $307       $704     $22      $1,033     $1,033 
                             
    Reconciliation to
     GAAP consolidated
     operating income (loss)                                    
      - Net effect from
        deferral of net
        revenues and                                         
        related cost of sales                                           (496)
      - Stock-based
        compensation expense                                             (90)
      - Restructuring expenses                                           (93)
      - Amortization of
        intangible assets
        and purchase price
        accounting related
        adjustments                                                     (292)
      - Integration and
        transaction costs                                                (29)
      - Other (v)                                                       (266)
                                                                        ---- 
    Consolidated operating
     income (loss) (GAAP)                                              $(233)
                                      
    Comparable Presentation
     Adjustments:                                                             
      Including Activision,
       Inc. prior period from
       July 1 to July 9, 2008                            
      Segment operating
       income (loss)           (10)         -       1          (9)       $(9)
      Reconciliation to
       consolidated operating
       income (loss)                                         
        - Stock-based
          compensation expense                                            (3)
        - Integration and
          transaction costs                                              (38)
                                                                         --- 
      Consolidated operating
       income (loss)                                                    $(50)
    
    Including Activision, Inc.
     prior periods for the
     six months ended 
     June 30, 2008                                                         
    Segment operating
     income (loss)             172          -       4         176       $176
    Reconciliation to
     consolidated operating
     income (loss)                                         
      - Stock-based
        compensation expense                                             (29) 
      - Integration and
        transaction costs                                                (12)
                                                                         --- 
      Consolidated operating
       income (loss)                                                    $135 
    -------------------------------------------------------------
    Non-GAAP Comparable
     Basis Segment Operating    
     Income (Loss)            $469       $704     $27      $1,200       
    -------------------------------------------------------------
    - Change in Comparable
      Basis -- Year Ended
      December 31, 2009 vs. 2008                                3%    
    -------------------------------------------------------------
         
    (i)   Activision Publishing (“Activision”) --  publishes interactive
          entertainment software and peripherals, which includes the
          Activision business conducted by Activision, Inc. prior to the
          business combination and certain studios, assets, and titles
          previously included in Vivendi Games’ “Sierra Entertainment”
          operating segment prior to the business combination. 
    (ii)  Blizzard --  Blizzard Entertainment, Inc. and its subsidiaries
          ("Blizzard") publishes traditional games and online subscription-
          based games in the MMORPG category. 
    (iii) Activision Blizzard Distribution ("Distribution") -- distributes
          interactive entertainment software and hardware products. 
    (iv)  Activision, Blizzard and Distribution are referred to collectively
          as Activision Blizzard Inc.’s core operations (“Core”). 
    (v)   Other represents Non-Core activities, which are handled by certain
          functional departments of our Activision segment and are
          insignificant to Activision Blizzard's financial condition and
          results of operations. Prior to July 1, 2009, we operated a fourth
          operating segment, Non-Core, which represented legacy Vivendi Games'
          ("VG") divisions or business units that the company had exited,
          divested, or wound down as part of our restructuring and integration
          efforts as a result of the Business Combination. As of July 1, 2009,
          in light of the decreasing significance of Non-Core activities, we
          ceased the management of Non-Core as a separate operating segment
          and consequently we are no longer providing separate operating
          segment disclosure with respect to Non-Core and have reclassified
          our prior period's segment presentation so that it conforms to the
           current period's presentation. 
    
    
    ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES OUTLOOK 
    For the Quarter Ending March 31, 2010 and                                 
    Year Ending December 31, 2010                                             
    GAAP to Non-GAAP Reconciliation                                           
    (Amounts in millions, except                                              
     per share data)                    Outlook for         Outlook for       
                                    Three Months Ending     Year Ending       
                                       March 31, 2010    December 31, 2010    
                                       --------------    -----------------    
                                                                              
    Net Revenues (GAAP)                    $1,120             $4,180    
                                                                        
    Excluding the impacts of:                                           
    -------------------------                                           
    Change in deferred net                                              
     revenues                                (595)               220 (a)
                                             ----                ---    
                                                                        
    Non-GAAP Net Revenues                    $525             $4,400    
                                                                        
                                                                        
    Earnings Per Diluted                                         
     Share (GAAP)                           $0.20              $0.47    
                                                                        
    Excluding the impacts of:                                           
    -------------------------                                           
    Change in deferred net                                              
     revenues and related cost of                                       
     sales                                  (0.22)              0.10 (b)
    Stock based compensation                 0.03               0.07 (c)
    Amortization of intangible                                          
     assets                                  0.01               0.06 (d)
                                                                        
                                            -----              -----    
    Non-GAAP Earnings Per Diluted                                       
     Share                                  $0.02              $0.70    
                                                                        
                                                                        
    (a) Reflects the net change in deferred net revenues.                     
    (b) Reflects the net change in deferred net revenues and related cost of  
        sales.                                                                
    (c) Reflects stock based compensation costs. Also includes the costs of   
        the Blizzard Entertainment equity plan and Vivendi awards to 
        historical Vivendi Games employees.    
    (d) Reflects amortization of intangible assets.                            
                                                                              
                                                                              
    The per share adjustments are presented as calculated, and the GAAP and   
    non-GAAP earnings (loss) per share information is also presented as      
    calculated. The sum of these measures, as presented, may differ due to   
    the impact of rounding.                                                  

SOURCE Activision Blizzard, Inc.



RELATED LINKS

http://www.activisionblizzard.com