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Activision notes Q2 decline in WoW subs, independence is a “win-win-win” says analyst

Friday, 26th July 2013 13:40 GMT By Stephany Nunneley

Activision Blizzard became an independent company last night, after it bought back the majority of its shares held by former parent company Vivendi which now, only holds a 12% stake. This is, according to Robert W. Baird & Co analyst Colin Sebastian, a “win-win-win” for all parties involved – despite a decrease in WoW subs.

The split

Speaking in an industry email, Sebastian said this was the best outcome for Activision shareholders, as it leaves the company independent and provides significant EPS accretion for investors.

“We believe this is a more favorable outcome for Activision shareholders than the alternative “special dividend” or sale of Vivendi’s shares to an alternative strategic buyer,” he said. ‘As part of the deal announcement, Activision also pre-announced better-than-expected Q2 revenue.”

Activision announced last night it will buy back 429 million of its shares from Vivendi for $5.83 billion ($13.60/share). Activision Blizzard will fund the acquisition with a combination of $1.2 billion of cash and approximately $4.6 billion of debt.

The firm used an independent company to work the deal with Vivendi.

An investment group led by CEO Bobby Kotick and co-chairman Brian Kelly will purchase 172 million shares from Vivendi for $2.34 billion in cash ($13.60/share), and included in the investor group are Chinese Internet company Tencent, Davis Advisors, Leonard Green, and a “large global institutional investor.”

CEO Bobby Kotick noted on the call to investors today that Tencent doesn’t have a seat on the board nor does it have the right to nominate someone to it – something he also noted back during the firm’s Q1 FY13 investor call.

He reiterated the Chinese firm was a “passive investor” and its contribution was the result of the “enthusiasm” it has regarding the Call of Duty Online deal in China.

Q2 fiscal year 2013 preliminary results

Following the completion of the transaction, Activision will be an independent company with the majority of its shares, or 63%, owned by the public. The firm discussed this in a financial briefing to investors this morning.

The firm is expected to announce its Q2 FY13 results next week, August 1. The firm expects revenue of $1.5 billion for the quarter and for the full year expects 4.3 billion in revenue.

Noted in Sebastian’s email was another decline in World of Warcraft subs, which was also briefly mentioned on the investor call.

World of Warcraft ended Q2 with 7.7 million subscribers, numbers which stood at 8.3 million back in May when the firm reported its Q1 financials. The 1.3 million decline was at the time attributed to the Chinese market’s decrease in casual engagement.

Activision didn’t state the reason for the decline on the call this morning, so we expect to hear more why the MMO lost 600,000 players when the financial results are published next week.

Breaking news

9 Comments

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  1. MCTJim

    Its good they got their “controlling share” back. What I see now is layoffs which unfortunately, people lose their jobs.

    #1 1 year ago
  2. GrimRita

    The decline is probably down to the fact that the game is old and boring and you gain xp far too easily.

    Awful game and it has done nothing but damage the MMO genre.

    #2 1 year ago
  3. viralshag

    Done nothing but damage the MMO genre? How did you figure that one out?

    You can’t blame WoW for other companies trying to copy a great formula and failing at it. WoW is easily one of the best made MMOs out there that did a lot of things right and the fact sub-wise it still leaves a lot of other MMOs eating its dust is a credit to that. Even after all these years.

    #3 1 year ago
  4. melonbuster1

    Can I get it for xbox1 already

    #4 1 year ago
  5. hitnrun

    I’m all for trashing WoW but it *is* one single 9 year old game. The way Activision analysts talk about it you’d think it was an entire genre or product line. Just how long is it reasonable to expect this one title to hold up half the tent?

    (Actually, come to think of it, WoW *is* a genre, too, but Activision doesn’t make money on the clones.)

    #5 1 year ago
  6. GrimRita

    @3 Thats the problem. WoW has shaped the MMO genre and even after almost 9 years, developers are STILL trying to copy this stale format and then left scratching their heads why no one played their game.

    If you’ve invested 5+ into this MMO, it will take something extra special to lure people away. People do not want a WoW clone they want something new.

    Even games today are still copying it – SWTOR has had the bright idea to bring in Arenas. Lets all go back to 2005 shall we?!

    #6 1 year ago
  7. DSB

    WoW did the same thing though. They borrowed heavily from Anarchy Online and Everquest. The difference being that they managed to take what was already there and make it a lot better than it was.

    For some reason, doing the same thing with WoW is proving immensely difficult. The near total lack of ambition in all the pretenders is pretty striking to me. Everybody has a gimmick, but no one really has the kind of idea that’s actually worth half a billion dollars.

    #7 1 year ago
  8. Ireland Michael

    It’s all just iterative. That’s the entire problem with the genre. They’re all too similar to each other.

    I can tell you the sole two reasons WoW is beating every other MMO on the market, even with lagging sales, and its an incredibly simple one – end game content, and a willingness to adapt and change to the demands of the consumers.

    #8 1 year ago
  9. Battler624

    i play wow and i can tell you that the reason people aren’t playing wow because its actually pretty boring..
    in a PVE term its repeatable, annoying and too easy once you know the special abilities
    in a PVP term some classes are overpowered “druid comes to mind” and some are underpowered “DK” some classes are balanced to a degree but got that one ability that make him unkillable by some classes “Warriors, Locks, Mages and Hunters”

    ^^ those are the chars i have on max level so i know them with my favorite being the most underpowered xD “WOLTK GLORY DAYS!”

    And on the leveling side its pretty much getting shit everything they do is for the pro players every damned balance and every damned max leveled

    the MoP was a beautiful expansion visual-wise but Woltk was the very best gameplay wise for all levels, if only WoW returned to WOLTK abilities and talent style that would be perfect.

    Tl;dr
    WoW is repeatable for PVE , unbalanced for PVP and boring and annoying for leveling.

    #9 1 year ago