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Activision Blizzard Q2 2010 Earnings Call Transcript

Activision Blizzard Q2 2010 Earnings Call Transcript

Activision Blizzard (ATVI)

Q2 2010 Earnings Call

August 05, 2010 4:30 pm ET

Executives

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Michael Morhaime - Chief Executive Officer of Blizzard Entertainment and President Blizzard Entertainment

Thomas Tippl - Chief Operating Officer and Chief Financial Officer

Robert Kotick - Chief Executive Officer, President and Director

Kristin Southey -

Analysts

Shawn Milne - Janney Montgomery Scott LLC

Brian Pitz - UBS Investment Bank

Heath Terry - FBR Capital Markets & Co.

Jess Lubert - Wells Fargo Securities, LLC

Colin Sebastian - Lazard Capital Markets LLC

Edward Williams - BMO Capital Markets U.S.

Justin Post - BofA Merrill Lynch

Jeetil Patel - Deutsche Bank AG

Presentation

Operator

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Previous Statements by ATVI
» Activision Blizzard Q1 2010 Earnings Call Transcript
» Activision Blizzard, Inc. Q4 2009 Earnings Call Transcript
» Activision Blizzard Q2 2009 Earnings Call Transcript

Good day, everyone, and welcome to Activision Blizzard's Second Quarter Current Year 2010 Earnings Conference. [Operator Instructions] At this time for opening remarks and introductions, I would like to turn today's call over to Ms. Kristin Southey. Please go ahead, Kristin.

Kristin Southey

Good afternoon, and thank you for joining us today for Activision Blizzard's Second Quarter Calendar 2010 Conference Call. With me today are Bobby Kotick, Chief Executive Officer of Activision Blizzard; Thomas Tippl, Chief Operating Officer and Chief Financial Officer of Activision Blizzard; and Mike Morhaime, Chief Executive Officer of Blizzard Entertainment.

I would like to remind everyone that we will be making statements that are not historical facts. These forward-looking statements are based on current expectations and assumptions that are subject to risk and uncertainties. As indicated in the slides, they're showing a number of important factors could cause the company's actual future results and other future circumstances to differ materially from those expressed in any forward-looking statement. Such factors include, without limitation: Sales level; increasing concentration of titles; shifting consumer spending trends; current macroeconomic and industry conditions and conditions within the video game market; the seasonal and cyclical nature of our market; difficulties related to World of Warcraft in China; our ability to predict consumer preferences among competing hardware platforms; declines in pricing; product returns; price reception; product delays; retail acceptance of our products; adoption rate and availability of new hardware and related software; competition, litigation and associated cost throughout the changes in technology; industry standards; business models, including online and youth games and consumer preferences; protection of proprietary rights; maintenance of key relationships, including the ability to attract, retain and develop key personnel and developers that can create high-quality hit titles; counterparty risk; economic, financial and political conditions and policies; foreign exchange and tax rates; identification of acquisition opportunities; and potential challenges associated with geographic expansion.

These important factors and other factors that potentially could affect the company's financial results are described in the company's annual report on Form 10-K for the period ended December 31, 2009. The company may change its intentions, views, or expectations at anytime and without notice based upon any changes in such factors in the company's assumptions or otherwise. The company undertakes no obligations to release publicly any revisions to any forward-looking statements to reflect events or circumstances after today, August 5, 2010, or to reflect the occurrence of unanticipated events.

I would also like to note that certain numbers we will be presenting today will be made in a non-GAAP basis, excluding the impact of the change in deferred net revenues and related cost of sales with respect to certain of our online-enabled games, expenses related to share-based payment, the operating results of products and operations from the historical of any gains that the physical company has exited or substantially wound down. Costs related to the business culmination between Activision and the vendor games, the amortization of intangibles and impairment of intangible assets and an associated tax benefit. Please refer to our earnings release, which is posted at www.activisionblizzard.com for a full GAAP to non-GAAP reconciliation and further explanation. Found there is a PowerPoint overview which you can access with the webcast and which will be posted in the website following the call. And now, I would like to introduce our CEO, Bobby Kotick.

Robert Kotick

Thank you, Kristin, and thank you, all, for joining us today. We are quite pleased to announce that we outperformed our EPS outlook for the quarter, and we're reaffirming our calendar year revenue and EPS expectations, which would result in the most profitable year in our history and our highest operating margins to date.

Our results this period once again affirmed our business strategy and superior worldwide execution. Our focus on the largest and most profitable opportunities and our ability to extend our leadership in the fast-growing online segments continue to provide us with a competitive advantage and recurring profitability that is unmatched in our industry.

In addition to our second quarter results, you'll hear more today about our blockbuster lineup for the balance of the year, including a recap of our first major launch of 2010 Blizzard Entertainment StarCraft II, which was released worldwide in July 27. The game is off to a superb start and with the relaunch of Battle.net players around the world are enjoying a significantly enhanced online experience. StarCraft is one of the highest quality, and it's further confirmation of the unique talent that is embedded in Blizzard. This will again become clear with the launch of Cataclysm later this year.

Our unrelenting commitment to quality, our resources and our proven skills in providing compelling content for gamers provide a unique competitive advantage. Our success continues to reflect the early and thoughtful way our management team anticipated, recognized and reacted to significant shifts taking place in audience needs and how we adapted to deliver more compelling games for our players.

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