8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K/A

AMENDMENT NO. 1

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported):  November 5, 2008

ACTIVISION BLIZZARD, INC.

(Exact Name of Registrant as Specified in Charter)

Delaware	001-15839	95-4803544
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)
3100 Ocean Park Boulevard, Santa Monica, CA		90405
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code:  (310) 255-2000

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Explanatory Note

This Form 8-K/A is being submitted to add a transcript of portions of the conference call conducted by Activision Blizzard, Inc. (the “Company”) on November 5, 2008 in conjunction with the press release referred to below.

The text of the Form 8-K originally submitted on November 5, 2008 is amended and restated as follows:

Item 2.02. Results of Operation and Financial Condition.

On November 5, 2008, the Company issued a press release announcing results for the Company for the fiscal quarter ended September 30, 2008. A copy of the press release is attached hereto as Exhibit 99.1.  As previously announced, the Company hosted a conference call and Webcast in conjunction with that release.  A transcript of portions of the conference call relating to the Company’s results of operations and financial condition for the three and nine months ended September 30, 2008 is attached hereto as Exhibit 99.2.

Certain Information Not Filed.  The information in this Item 2.02 and Exhibits 99.1 and 99.2 attached to this Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall this Item 2.02 or such Exhibits 99.1 or 99.2 or any of the information contained therein be deemed incorporated by reference in any filing under the Securities Exchange Act of 1934 or the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.

Item 9.01.	Financial Statements and Exhibits.
(d)  Exhibits
99.1	Press Release dated November 5, 2008 (furnished not filed) *
99.2	Portions of Transcript of Conference Call held November 5, 2008 (furnished not filed)

*     No changes have been made to Exhibit 99.1 from the version originally included in the Form 8-K submitted by the Company on November 5, 2008.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date:  November 10, 2008	ACTIVISION BLIZZARD, INC.
	By:	/s/ Thomas Tippl
		Thomas Tippl
		Chief Financial Officer

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EXHIBIT INDEX

Exhibit No.	Description
99.1	Press Release dated November 5, 2008 (furnished not filed) *
99.2	Portions of Transcript of Conference Call held November 5, 2008 (furnished not filed)

*     No changes have been made to Exhibit 99.1 from the version originally included in the Form 8-K submitted by the Company on November 5, 2008.

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EX-99.1

Exhibit 99.1

Contacts:	Kristin Southey
	Vice President, Investor Relations
	(310) 255-2635
	ksouthey@activision.com
	Maryanne Lataif
	Senior Vice President, Corporate Communications
	(310) 255-2704
	mlataif@activision.com

FOR IMMEDIATE RELEASE

ACTIVISION BLIZZARD ANNOUNCES SEPTEMBER QUARTER RESULTS

-       September Quarter Net Revenues and EPS Exceed Prior Outlook -

-       Company Reaffirms Full Year 2008 Outlook –

-       Company’s Board of Directors Authorizes $1 Billion Stock Repurchase Program -

Santa Monica, CA – November 5, 2008 – Activision Blizzard, Inc. (Nasdaq: ATVI) today announced September quarter financial results.

For the quarter ended September 30, 2008, Activision Blizzard’s GAAP net revenues were $711 million.  Excluding the impact of change in deferred net revenues ($12 million) and net revenues from Activision Blizzard’s non-core exit operations ($6 million), the company’s non-GAAP net revenues were $717 million. Including Activision’s stand-alone net revenues of $53 million for July 1 – July 9, 2008, the company’s non-GAAP comparable-basis net revenues were $770 million.  The company’s prior non-GAAP net revenue outlook was $620 million.

Activision Blizzard’s GAAP operating loss for the quarter was $194 million.  Excluding the impact of the change in deferred net revenues and cost of sales ($12 million), the impact of equity-based compensation expense ($26 million), Activision Blizzard’s non-core exit operations loss ($110 million), one-time costs related to the business combination with Vivendi Games ($78 million), and the amortization of intangibles and the changes in costs of sales resulting from purchase price accounting adjustments ($90 million), Activision Blizzard’s non-GAAP operating income was $122 million.   Including Activision’s stand-alone non-GAAP operating loss of $9 million for July 1 – July 9, 2008, the Company’s non-GAAP comparable-basis operating income was $113 million.

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Activision Blizzard Announces September Quarter Results

For the quarter, Activision Blizzard’s split-adjusted GAAP loss per share was $0.08.  Excluding the impact of the change in deferred net revenues and cost of sales ($0.01 per share), the impact of equity-based compensation expense ($0.01 per share), Activision Blizzard’s non-core exit operations loss ($0.05 per share), one-time costs related to the business combination with Vivendi Games ($0.04 per share), and the amortization of intangibles and the changes in costs of sales resulting from purchase price accounting adjustments ($0.04 per share), Activision Blizzard’s non-GAAP split-adjusted earnings per diluted share were  $0.07.   The company’s prior non-GAAP split-adjusted earnings per diluted share outlook was $0.04.

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.

Robert Kotick, CEO of Activision Blizzard, stated, “For our first quarter as a combined company, Activision Blizzard’s financial results were higher than the outlook we provided on our last earnings call, both on a GAAP and non-GAAP basis.  Our performance was driven by continued strong worldwide sales of Call of Duty® 4: Modern Warfare™, Guitar Hero®: Aerosmith® and Guitar Hero®: On Tour™, Blizzard Entertainment®’s World of Warcraft® and the international release of LucasArts’ Star Wars™: The Force Unleashed™.”

Kotick continued, “In the December quarter, we will launch our strongest holiday slate ever, which is based on some of the best-selling franchises in the industry.  We are excited about our holiday releases, which are all based on proven franchises, and will deliver our entire slate on schedule with strong product quality on our key titles.  However, we remain cautious given the likely slowdown in consumer spending this holiday season.”

“As a result of our strong momentum through the first 9 months of the year and our solid holiday slate, we are reaffirming our full year non-GAAP outlook of $4.9 billion in revenues and $1.2 billion in operating income.  We also announced a $1 billion share repurchase program which illustrates our confidence in the long-term growth of the company and our commitment to providing superior returns to our shareholders,” Kotick added.

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Activision Blizzard Announces September Quarter Results

Business Highlights

·For the September quarter, Activision Blizzard had two of the top-10 titles in dollars on all console platforms in the U.S., according to The NPD Group.

·For the September quarter, Activision Blizzard was the #1 third-party publisher on the Nintendo DS, according to The NPD Group.

·For the September quarter, Guitar Hero: On Tour was the #1 best-selling title overall in North America for the Nintendo DS, according to The NPD Group.

·For the September quarter, Activision Blizzard had two of the top-five PC titles worldwide – Blizzard Entertainment’s World of Warcraft: Battle Chest® and Call of Duty 4: Modern Warfare, according to Charttrack, Gfk and The NPD Group.

·For the first nine months of the calendar year, Guitar Hero remained the #1 best-selling franchise in U.S. on all console platforms, according to the NPD Group.

·On July 9, 2008, Vivendi Games, Inc. and Activision, Inc. completed the transaction, announced on December 2, 2007 to create Activision Blizzard as the world’s most profitable pure-play online and console game publisher. Activision Blizzard was formed by combining Activision, Inc., one of the world’s leading independent publishers of interactive entertainment, and Vivendi Games, Inc., Vivendi’s interactive entertainment business, which includes Blizzard Entertainment’s World of Warcraft, the world’s #1 subscription-based massively multiplayer online role-playing game (“MMORPG”).

·On August 12, 2008, Blizzard Entertainment, Inc. and NetEase.com, Inc. announced an agreement to license Blizzard Entertainment’s StarCraft^® II, Warcraft^® III: Reign of Chaos™, Warcraft III: The Frozen Throne™, and Battle.net^® platform, which provides online multiplayer services for these games, to Shanghai EaseNet Network Technology Limited, an affiliated company of NetEase.com, Inc. Blizzard Entertainment and NetEase also established a joint venture, which will provide support for the operation of the licensed games and Battle.net platform in China.

·On September 8, 2008, Activision Blizzard completed a two-for-one stock split.

·On September 12, 2008, Activision Publishing acquired FreeStyle Games, a premier U.K. based video game developer specializing in music-based games.

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Activision Blizzard Announces September Quarter Results

·On October 28, 2008, Blizzard Entertainment, Inc. announced that the subscribership for World of Warcraft, its award-winning MMORPG, exceeded 11 million players worldwide.

Company Outlook

For the December quarter, Blizzard Entertainment expects to release Wrath of the Lich King™, World of Warcraft’s second expansion pack, and Activision Publishing expects to release a full slate of titles, including Guitar Hero® World Tour™, Guitar Hero®: On Tour Decades™, Call of Duty®: World at War™, Quantum of Solace™, Spider-Man™: Web of Shadows, Madagascar: Escape 2 Africa™ Video Game, Crash Bandicoot®: Mind Over Mutant, Spyro™: Dawn of the Dragon,  Kung Fu Panda: Legendary Warriors ™, TRANSFORMERS Animated: The Game and Tony Hawk’s Motion.

Activision Blizzard continues to expect that online functionality for certain key titles to be released in the December quarter, and thereafter, will become a significant component of game play for certain platforms and that the company will have continuing performance obligations beyond the sale of the game for these titles.  As a result, the company expects to begin recognizing a substantial amount of net revenues and costs of sales from these online-enabled games over the estimated service period.

Revenues related to the sale of World of Warcraft boxed software, including the sale of expansion packs and other ancillary revenues will continue to be deferred and recognized ratably over the estimated customer life beginning upon activation of the software and delivery of the services.

As a result of the above, Activision Blizzard anticipates that a considerable amount of net revenues and costs of sales that would have been recognized in the December quarter will be recognized in calendar year 2009.  While this will not impact the economics of Activision Blizzard’s business or its cash flows, these changes will have a material impact on the company’s calendar 2008 GAAP results.

In order to provide comparable year-over-year performance information, Activision Blizzard’s non-GAAP results will exclude the impact of the change in deferred net revenues and cost of sales related to those online-enabled key titles on certain platforms, and will also exclude deferred revenues and costs related to the MMORPG platform for World of Warcraft.

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Activision Blizzard Announces September Quarter Results

Additionally, in calendar 2008, in order to provide comparable operating performance information for the core operations of Activision Blizzard, the company’s non-GAAP results also exclude: the impact of expenses related to equity-based compensation costs; Activision Blizzard’s non-core exit operations, which is the operating results of products and operations from the historical Vivendi Games, Inc. businesses that the company has begun to exit or wind down; one-time 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 increase in the fair value of inventories and the associated changes in cost of sales resulting from purchase price accounting adjustments from the business combination; and the associated tax benefits.

For the December quarter 2008, Activision Blizzard expects GAAP net revenues of $1.6 billion, and GAAP loss per share of $0.01. Excluding the impact of change in deferred net revenues ($569 million), and net revenues from Activision Blizzard’s non-core exit operations ($2 million), the company expects non-GAAP net revenues of $2.2 billion.

Excluding the impact of the change in deferred net revenues and cost of sales ($0.17 per share), equity-based compensation expense ($0.02 per share), Activision Blizzard’s non-core exit operations ($0.01 per share), one-time costs related to the business combination with Vivendi Games, Inc. ($0.01 per share), and the amortization of intangibles and the changes in costs of sales resulting from purchase price accounting adjustments ($0.09 per share), Activision Blizzard expects non-GAAP earnings per diluted share of $0.29 for the December quarter.

Stock Repurchase Program

Under Activision Blizzard’s stock repurchase program, shares may be purchased as determined by the company from time to time on the open market or in private transactions, including structured or accelerated transactions. The timing and amount of share repurchases under the program will be determined by the company based on its evaluation of market conditions and other factors.    The repurchase program may be suspended or discontinued at any time.

The repurchase program will be funded using the company’s working capital.  Any repurchased shares will be available for use in connection with the company’s stock plans and for other corporate purposes.

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Activision Blizzard Announces September Quarter Results

Conference Call

Today at 4:30 p.m. EST, Activision Blizzard’s management will host a conference call and Webcast to discuss Activision Blizzard’s results for the quarter ended September 30, 2008 and management’s outlook for the remainder of the calendar year. 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 via live Webcast or to listen to the call live by dialing into 719-325-4871 in the U.S.

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 costs of sales; the impact of expenses related to equity-based compensation costs; Activision Blizzard’s non-core exit operations (which is the operating results of products and operations from the historical Vivendi Games, Inc. businesses that the company has begun to exit or wind down); one-time 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 increase in the fair value of inventories and the associated changes in cost of sales resulting from purchase price accounting adjustments from the business combination; and the associated tax benefits.  These adjustments have  the effect of increasing non-GAAP net revenues, non-GAAP net income, non-GAAP earnings per share and non-GAAP operating margin (and reducing non-GAAP net loss and non-GAAP loss per share) by the same amounts as compared with GAAP net revenues, GAAP net income (loss), GAAP earnings (loss) per share and GAAP operating margin for the period.

As online functionality becomes a more important component of gameplay, the company expects that certain of Activision Blizzard’s non-subscription based online-enabled games to be released in the December quarter will contain a more-than-inconsequential separate service deliverable in addition to the product, and its performance obligations for these games will extend beyond the sale of the games. Vendor-specific objective evidence of fair value will not exist for the online services, as the company does not plan to separately charge for this component of online-enabled games.

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Activision Blizzard Announces September Quarter Results

As a result, for certain key titles to be released in the December quarter of 2008 and thereafter, the company will recognize all of the revenues from the sale of certain of Activision’s online-enabled games for certain platforms ratably over the estimated service period. In addition, the company will defer the costs of sales of those titles to match revenues. As a consequence, the company’s non-GAAP results will exclude the impact of the change in deferred revenues and costs of sales related to certain of Activision’s online-enabled games for certain of the Microsoft, Sony, Nintendo and PC platforms in order to provide comparable year-over-year performance.

Revenues related to the sale of World of Warcraft boxed software, including the sale of expansion packs and other ancillary revenues will continue to be deferred and recognized ratably over the estimated customer life beginning upon activation of the software and delivery of the services.

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 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, net revenues, net income (loss), earnings (loss) per share and operating margin directly ahead of non-GAAP net revenues, non-GAAP net income (loss), non-GAAP earnings (loss) per share, and non-GAAP operating margin, and by providing a reconciliation which indicates and describes the adjustments made.

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

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Activision Blizzard Announces September Quarter Results

Management also believes that non-GAAP measures that exclude Activision Blizzard’s non-core exit operations, one-time costs related to the business combination between Activision, Inc. and Vivendi Games, Inc. (including transaction costs, integration costs, and the costs associated with restructuring activities), the amortization of intangibles and the increase in the fair value of inventories and the associated changes in cost of sales resulting from purchase price accounting adjustments from the business combination, provides a better comparison to prior periods in which Activision, Inc. and Vivendi Games, Inc. were operating as stand-alone companies, and the resulting effects arising from the business combination does not affect the on-going economics of the combined entity. Management believes the use of these non-GAAP financial measures helps investors to better understand the 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.

These 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.

These 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 (loss), non-GAAP earnings (loss) per share, 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 obtaining control of Activision, Inc. through the acquisition of a majority of common stock of Activision, Inc., the business combination is 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, Inc. prior to July 9, 2008 are those of Vivendi Games, Inc. and  the results of Activision, Inc. prior to July 9, 2008 are not included as part of Activision Blizzard, Inc.’s historical financial statements.

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Activision Blizzard Announces September Quarter Results

As one means of analyzing Activision Blizzard, Inc.’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 9, 2008 and (3) Activision, Inc.’s results prior to July 9, 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 three and nine months ended September 30, 2007 and 2008

·Non-GAAP Comparable Basis Segment Operating Income (Loss) for the three and nine months ended September 30, 2007 and 2008

In conjunction with the business combination, Activision Blizzard, Inc. 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 four segments:

i.Activision Publishing (“Activision”) – which consists of the  historical business of Activision, Inc. publishing interactive entertainment software and peripherals, and certain studios, assets, and titles previously included in Vivendi Games’ historical “Sierra” operating segment;

ii.Blizzard —  which consists of the business of Blizzard Entertainment, Inc. and its subsidiaries publishing  traditional games and online subscription-based games in the MMORPG category;

iii.Distribution —  which consists of the distribution of interactive entertainment software and hardware products; and

iv.Activision Blizzard’s non-core exit operations (“Non-Core”) – which consists of legacy divisions or business units that the company has begun to exit or wind down as part of our restructuring and integration efforts as a result of the business combination.

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Activision Blizzard Announces September Quarter Results

Activision, Blizzard and Distribution are referred to collectively as Activision Blizzard Inc.’s core operations (“Core”).

With respect to periods prior to July 9, 2008, results for historical Activision, Inc. are reported in the Activision and Distribution segments. In addition, as a result of the change in operating and reporting segments, all prior period segment information has been restated to conform to this new financial statement presentation.

About Activision Blizzard

Headquartered in Santa Monica, California, Activision Blizzard, Inc. is a worldwide pure-play online, PC, console and handheld game publisher with leading market 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, Romania, Australia, Chile, India, Russia, Japan, 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 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, Activision Blizzard’s ability to predict consumer preferences among competing hardware platforms (including next-generation hardware), declines in software pricing, product returns and price protection, product delays, retail acceptance of Activision Blizzard’s products, adoption rate and availability of new hardware and related software, industry competition, rapid changes in technology and industry standards, protection of proprietary rights, litigation against Activision Blizzard, maintenance of relationships with key personnel, customers, vendors and third-party developers, domestic and international economic, financial and political conditions and policies, foreign exchange rates, integration of recent acquisitions and the identification of suitable future acquisition opportunities, Activision Blizzard’s success in integrating the operations of Activision and Vivendi Games in a timely manner, or at all, and the combined Company’s ability to realize the anticipated benefits and synergies of the transaction to the extent, or in the timeframe, anticipated, and the other  factors  identified in the risk factors section of Activision Blizzard’s quarterly report on Form 10-Q for the June 30, 2008 quarter. 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.

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Activision Blizzard Announces September Quarter Results

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.

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ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except earnings (loss) per share data)

	Quarter ended September 30,						Nine months ended September 30,
	2008			2007*			2008			2007*
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Net revenues:
Product sales	$	413		$	98		$	553		$	246
Subscription, licensing and other revenues	298			228			834			650
Total net revenues	$	711		$	326		$	1,387		$	896
Costs and expenses:
Cost of sales - product costs	279			31			350			95
Cost of sales - software royalties and amortization	50			5			88			14
Cost of sales - intellectual property licenses	36			1			45			5
Cost of sales - massively multi-play online game(“MMOG”)	43			40			123			146
Product development	200			117			414			327
Sales and marketing	142			46			220			105
Restructuring costs	61			—			61			(1		)
General and administrative	94			29			172			71
Total costs and expenses	905			269			1,473			762
Operating income (loss)	(194		)	57			(86		)	134
Investment income, net	24			(2		)	28			(5		)
Income (loss) before income tax provision (benefit)	(170		)	55			(58		)	129
Income tax provision (benefit)	(62		)	7			(22		)	(12		)
Net income (loss)	$	(108	)	$	48		$	(36	)	$	141
Basic loss per share	$	(0.08	)	$	0.08		$	(0.04	)	$	0.24
Weighted average common shares outstanding	1,271			591			816			591
Diluted loss per share	$	(0.08	)	$	0.08		$	(0.04	)	$	0.24
Weighted average common shares outstanding assuming dilution	1,271			591			816			591

* 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 is 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 9, 2008 are those of Vivendi Games, Inc. and (ii) the results of Activision, Inc. prior to July 9, 2008 are not included as part of the company’s historical financial statements.

Further, earnings per share for periods prior to the Business Combination are retrospectively adjusted to reflect the number of split adjusted shares received by Vivendi, former parent of Vivendi Games, Inc.

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

	September 30,			December 31,
	2008			2007*
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	2,842		$	62
Short-term investments	94			3
Accounts receivable, net	316			104
Inventories	377			21
Software development	226			25
Intellectual property licenses	10			9
Deferred income taxes	228			143
Intangible assets, net	51			—
Other current assets	57			23
Total current assets	4,201			390
Long-term investments	86			—
Software development	20			51
Intellectual property licenses	—			8
Property and equipment, net	168			129
Deferred income taxes	80			24
Other assets	21			6
Intangible assets, net	1,462			7
Trade name	433			53
Goodwill	7,270			203
Total assets	$	13,741		$	871
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	338		$	49
Deferred revenues	206			197
Accrued expenses and other liabilities	557			274
Total current liabilities	1,101			520
Deferred income tax	696			—
Other liabilities	169			111
Total liabilities	1,966			631
Shareholders’ equity:
Common stock	—			—
Additional paid-in capital	12,165			490
Net payable to Vivendi and affiliated companies	—			77
Retained earnings (accumulated deficit)	(403		)	(367		)
Accumulated other comprehensive income	13			40
Total shareholders’ equity	11,775			240
Total liabilities and shareholders’ equity	$	13,741		$	871

*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 is 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 9, 2008 are those of Vivendi Games, Inc. and (ii) the results of Activision, Inc. prior to July 9, 2008 are not included as part of the company’s historical financial statements.

Further, earnings per share for periods prior to the Business Combination are retrospectively adjusted to reflect the number of split adjusted shares received by Vivendi, former parent of Vivendi Games, Inc.

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP NET INCOME TO NON-GAAP NET INCOME

(In millions, except earnings (loss) per share data)

Quarter ended September 30, 2008		Net Revenues			Cost of Sales - Product costs		Cost of Sales - Software Royalties and Amortization		Cost of Sales - Intellectual property licenses		Cost of Sales - MMOG		Product Development		Sales and Marketing		General and Administrative		Restructuring		Total Costs and Expenses
GAAP Measurement		$	711		$279		$50		$36		$43		$200		$142		$94		$61		$905
Less: Changes in deferred net revenues and cost of sales	(a)	12			0		—		—		—		—		—		—		—		0
Less: Equity-based compensation (including purchase price accounting related adjustments)	(b)	—			—		—		—		0		(7	)	(4	)	(15	)	—		(26	)
Less: Results of Activision Blizzard’s non-core exit operations	(c)	(6		)	(1	)	(1	)	(0	)	(0	)	(91	)	(12	)	(11	)	—		(116	)
Less: One time costs related to the Vivendi transaction, integration and restructuring	(d)	—			—		—		—		—		—		—		(17	)	(61	)	(78	)
Less: Amortization of intangibles and purchase price accounting related adjustments	(e)	—			(8	)	(24	)	(22	)	—		—		(36	)	(1	)	—		(90	)
Non-GAAP Measurement		$717			$270		$25		$14		$43		$102		$91		$49		$—		$595
Quarter ended September 30, 2008		Operating Income (Loss)			Net Income (Loss)		Basic Earnings (Loss) per Share		Diluted Earnings (Loss) per Share
GAAP Measurement		$(194		)	$(108	)	(0.08	)	(0.08	)
Less: Changes in deferred net revenues and cost of sales	(a)	12			7		0.01		0.01
Less: Equity-based compensation (including purchase price accounting related adjustments)	(b)	26			16		0.01		0.01
Less: Results of Activision Blizzard’s non-core exit operations	(c)	110			67		0.05		0.05
Less: One time costs related to the Vivendi transaction, integration and restructuring	(d)	78			56		0.04		0.04
Less: Amortization of intangibles and purchase price accounting related adjustments	(e)	90			54		0.04		0.04
Non-GAAP Measurement		$122			$92		0.07		0.07

(a)Reflects the net change in deferred net revenues and deferred cost of sales.

(b)Includes expense related to employee stock options, employee stock purchase plan and restricted stock rights under Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment.”

(c)Reflects the results of products and operations from the historical Vivendi Games businesses that the company has begun to exit or wind down.

(d)Includes one-time 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 increase in the fair value of inventories and associated cost of sales, all of which relate to purchase price accounting related adjustments.

See explanation above regarding the Company’s practice on reporting non-GAAP financial measures. 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 TO NON-GAAP NET INCOME

(In millions, except earnings (loss) per share data)

Quarter ended September 30, 2007		Net Revenues			Cost of Sales - Product costs			Cost of Sales - Software Royalties and Amortization			Cost of Sales - Intellectual property licenses			Cost of Sales - MMOG		Product Development			Sales and Marketing			General and Administrative			Restructuring			Total Costs and Expenses
GAAP Measurement		$	326		$	31		$	5		$	1		$	40	$	117		$	46		$	29		$	—		$	269
Less: Changes in deferred net revenues and cost of sales	(a)	(31		)	(3		)	—			—			—		—			—			—			—			(3		)
Less: Equity-based compensation (including purchase price accounting related adjustments)	(b)	—			(1		)	—			—			—		(35		)	(3		)	(3		)	—			(42		)
Less: Results of Activision Blizzard’s non-core exit operations	(c)	(3		)	—			(1		)	—			—		(23		)	(10		)	(9		)	2			(41		)
Less: One time costs related to the Vivendi transaction, integration and restructuring	(d)	—			—			—			—			—		—			—			—			(2		)	(2		)
Less: Amortization of intangibles and purchase price accounting related adjustments	(e)	—			—			(1		)	—			—		—			—			—			—			(1		)
Non-GAAP Measurement		$	292		$	27		$	3		$	1		$	40	$	59		$	33		$	17		$	—		$	180
Quarter ended September 30, 2007		Operating Income (Loss)			Net Income (Loss)			Basic Earnings (Loss) per Share			Diluted Earnings (Loss) per Share
GAAP Measurement		$	57		$	48		$	0.08		$	0.08
Less: Changes in deferred net revenues and cost of sales	(a)	(28		)	(17		)	(0.03		)	(0.03		)
Less: Equity-based compensation (including purchase price accounting related adjustments)	(b)	42			25			0.04			0.04
Less: Results of Activision Blizzard’s non-core exit operations	(c)	38			22			0.04			0.04
Less: One time costs related to the Vivendi transaction, integration and restructuring	(d)	2			1			0.00			0.00
Less: Amortization of intangibles and purchase price accounting related adjustments	(e)	1			1			0.00			0.00
Non-GAAP Measurement		$	112		$	80		$	0.14		$	0.14

(a)Reflects the net change in deferred net revenues and deferred cost of sales.

(b)Includes expense related to employee stock options, employee stock purchase plan and restricted stock rights under Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment.”

(c)Reflects the results of products and operations from the historical Vivendi Games businesses that the company has begun to exit or wind down.

(d)Includes one-time 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 increase in the fair value of inventories and associated cost of sales, all of which relate to purchase price accounting related adjustments.

See explanation above regarding the Company’s practice on reporting non-GAAP financial measures. 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 Quarter Ended September 30, 2008

(Amounts in millions)

									Percent
									Increase
	Quarter Ended								(Decrease)
	September 30, 2008				September 30, 2007
	Amount		% of Total		Amount		% of Total
Geographic Revenue Mix
North America	$	295	41	%	$	147	45	%	101	%
Europe	348		49	%	122		37	%	185	%
Asia Pacific	62		9	%	54		17	%	15	%
Total core operations net revenues	$	705	99	%	$	323	99	%	118	%
Non-core operations	$	6	1	%	$	3	1	%	100	%
Total consolidated net revenues	$	711	100	%	$	326	100	%	118	%
Segment/Platform Mix
Activision and Blizzard:
MMOG	$	271	38	%	$	269	83	%	1	%
Console	272		38	%	16		5	%	1600	%
Hand-held	81		11	%	7		2	%	1057	%
PC	25		4	%	31		9	%	-19	%
Total Activision and Blizzard net revenues	$	649	91	%	$	323	99	%	101	%
Total distribution net revenues	$	56	8	%	$	-	0	%	0	%
Total net revenues core operations	$	705	99	%	$	323	99	%	118	%
Non-core operations	$	6	1	%	$	3	1	%	100	%
Total consolidated net revenues	$	711	100	%	$	326	100	%	118	%
									Percent
									Increase
	Nine Months Ended								(Decrease)
	September 30, 2008				September 30, 2007
	Amount		% of Total		Amount		% of Total
Geographic Revenue Mix
North America	$	591	43	%	$	422	47	%	40	%
Europe	627		45	%	374		42	%	68	%
Asia Pacific	153		11	%	91		10	%	68	%
Total core operations net revenues	$	1,371	99	%	$	887	99	%	55	%
Non-core operations	$	16	1	%	$	9	1	%	78	%
Total consolidated net revenues	$	1,387	100	%	$	896	100	%	55	%
Segment/Platform Mix
Activision and Blizzard:
MMOG	$	828	60	%	$	746	83	%	11	%
Console	335		24	%	53		6	%	532	%
Hand-held	102		7	%	21		2	%	386	%
PC	50		4	%	67		8	%	-25	%
Total Activision and Blizzard net revenues	$	1,315	95	%	$	887	99	%	48	%
Total distribution net revenues	$	56	4	%	$	-	0	%	0	%
Total net revenues core operations	$	1,371	99	%	$	887	99	%	55	%
Non-core operations	$	16	1	%	$	9	1	%	78	%
Total consolidated net revenues	$	1,387	100	%	$	896	100	%	55	%

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

FINANCIAL INFORMATION

For the Quarter Ended September 30, 2008

	Quarter Ended		Quarter Ended		Nine Months Ended		Nine Months Ended
	September 30, 2008		September 30, 2007		September 30, 2008		September 30, 2007
Activision & Blizzard Net Revenues
MMOG	42	%	84	%	63	%	84	%
PC	4	%	9	%	4	%	8	%
Console	42	%	5	%	26	%	6	%
Sony PlayStation 3	9	%	0	%	6	%	1	%
Sony PlayStation 2	9	%	4	%	6	%	3	%
Microsoft Xbox 360	11	%	0	%	7	%	1	%
Nintendo Wii	13	%	1	%	7	%	1	%
Other	0	%	0	%	0	%	0	%
Hand-held	12	%	2	%	7	%	2	%
Sony PlayStation Portable	2	%	1	%	1	%	1	%
Nintendo Dual Screen	10	%	1	%	6	%	1	%
Nintendo Game Boy Advance	0	%	0	%	0	%	0	%
Total Activiion & Blizzard net revenues	100	%	100	%	100	%	100	%

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

For the nine months ended September 30, 2008 and 2007

GAAP to non-GAAP reconciliations

Segment Information - Comparable Basis Segment Operating Income (Loss) (amounts in millions)

									Segments total / Consolidated
Nine months ended September 30, 2008	Activision (i)		Blizzard (ii)	Distribution (iii)	Core (iv)		Non-Core (v)
Segment operating income(loss) (VG Jan. 1-Sept 30, Activision July 10-Sept 30)	(61	)	447	3	389		(251	)	138
Reconciliation to GAAP consolidated operating income(loss)
- Net effect from deferral of net revenues and cost of sales									(7	)
- Stock-based compensation									(47	)
- Restructuring expenses									(61	)
- Amortization of intangible assets and purchase price accounting related adjustments									(92	)
- Integration and transaction costs									(17	)
Consolidated operating income(loss) (GAAP)									(86	)
Comparable Presentation Adjustments:
Including Activision, Inc. prior periods from July 1 to July 9, 2008
Segment operating income(loss)	(10	)	-	1	(9	)			(9	)
Reconciliation to consolidated operating income(loss)
- Stock-based compensation									(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									(29	)
- Integration and transaction costs									(12	)
Consolidated operating income(loss)									135
Non-GAAP Comparable Basis Segment Operating Income (Loss)	101		447	8	556
									Segments total /
Nine months ended September 30, 2007	Activision (i)		Blizzard (ii)	Distribution (iii)	Core (iv)		Non-Core (v)		Consolidated
Segment operating income(loss) (VG only)	(79	)	447	-	368		(86	)	282
Reconciliation to GAAP consolidated operating income(loss)
- Net effect from deferral of net revenues and cost of sales									(67	)
- Stock-based compensation									(77	)
- Amortization of intangible assets and purchase price accounting related adjustments									(3	)
- Restructuring expenses									(1	)
Consolidated operating income(loss) (GAAP)									134
Comparable Presentation Adjustment:
Including Activision, Inc. prior periods for the nine months ended September 30, 2007
Segment operating income(loss)	13		-	1	14				14
Reconciliation to consolidated operating income(loss)
- Stock-based compensation									(22	)
Consolidated operating income(loss)									(9	)
Non-GAAP Comparable Basis Segment Operating Income (Loss)	(66	)	447	1	382
- Change in comparable basis — nine months ended September 30, ‘08 vs. ‘07					46	%

(i) Activision Publishing (“Activision”) – which consists of the  historical business of Activision, Inc. publishing interactive entertainment software and peripherals, and certain studios, assets, and titles previously included in Vivendi Games’ historical “Sierra” operating segment.

(ii) Blizzard —  which consists of the business of Blizzard Entertainment, Inc. and its subsidiaries publishing of traditional games and online subscription-based games in the MMOG category.

(iii) Distribution —  which consists of the distribution of interactive entertainment software and hardware products.

(iv) Activision, Blizzard and Distribution are referred to collectively as Activision Blizzard Inc.’s core operations (“Core”).

(v) Activision Blizzard’s non-core exit operations (“Non-Core”) – which consists of legacy divisions or business units that the company has begun to exit or wind down as part of our restructuring and integration efforts as a result of the business combination.

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

For the three months ended September 30, 2008 and 2007

GAAP to non-GAAP reconciliations

Segment Information - Comparable Basis Segment Operating Income (Loss) (amounts in millions)

									Segments total /
Three months ended September 30, 2008	Activision (i)		Blizzard (ii)	Distribution (iii)	Core (iv)		Non-Core (v)		Consolidated
Segment operating income(loss) (VG July 1-Sept 30, Activision July 10-Sept 30)	(26	)	146	2	122		(110	)	12
Reconciliation to GAAP consolidated operating income(loss)
- Net effect from deferral of net revenues and cost of sales									(12	)
- Stock-based compensation									(26	)
- Restructuring expenses									(61	)
- Amortization of intangible assets and purchase price accounting related adjustments									(90	)
- Integration and transaction costs									(17	)
Consolidated operating income(loss) (GAAP)									(194	)
Comparable Presentation Adjustment:
Including Activision, Inc. prior periods from July 1 to July 9, 2008
Segment operating income(loss)	(10	)	—	1	(9	)			(9	)
Reconciliation to consolidated operating income(loss)
- Stock-based compensation									(3	)
- Integration and transaction costs									(38	)
Consolidated operating income(loss)									(50	)
Non-GAAP Comparable Basis Segment Operating Income (Loss)	(36	)	146	3	113
									Segments total /
Three months ended September 30, 2007	Activision (i)		Blizzard (ii)	Distribution (iii)	Core (iv)		Non-Core (v)		Consolidated
Segment operating income(loss) (VG only)	(19	)	132	—	113		(40	)	73
Reconciliation to GAAP consolidated operating income(loss)
- Net effect from deferral of net revenues and cost of sales									28
- Stock-based compensation									(43	)
- Amortization of intangible assets and purchase price accounting related adjustments									(1	)
Consolidated operating income(loss) (GAAP)									57
Comparable Presentation Adjustment:
Including Activision, Inc. prior periods for the three months ended September 30, 2007
Segment operating income(loss)	(3	)	—	0	(3	)			(3	)
Reconciliation to consolidated operating income(loss)
- Stock-based compensation									(7	)
Consolidated operating income(loss)									(10	)
Non-GAAP Comparable Basis Segment Operating Income (Loss)	(22	)	132	0	110
- Change in comparable basis – three months ended September 30, ‘08 vs. ‘07					3	%

(i) Activision Publishing (“Activision”) —  which consists of the  historical business of Activision, Inc. publishing interactive entertainment software and peripherals, and certain studios, assets, and titles previously included in Vivendi Games’ historical “Sierra” operating segment.

(ii) Blizzard —  which consists of the business of Blizzard Entertainment, Inc. and its subsidiaries publishing of traditional games and online subscription-based games in the MMOG category.

(iii) Distribution —  which consists of the distribution of interactive entertainment software and hardware products.

(iv) Activision, Blizzard and Distribution are referred to collectively as Activision Blizzard Inc.’s core operations (“Core”).

(v) Activision Blizzard’s non-core exit operations (“Non-Core”) — which consists of legacy divisions or business units that the company has begun to exit or wind down as part of our restructuring and integration efforts as a result of the business combination.

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

For the nine months ended September 30, 2008 and 2007

GAAP to non-GAAP reconciliations

Segment Information - Comparable Basis Segment Net Revenues (amounts in millions)

Nine months ended September 30, 2008	Activision (i)	Blizzard (ii)	Distribution (iii)	Core (iv)	Non-Core (v)	Segments total /Consolidated
Segment net revenues (VG Jan 1-Sept 30, Activision July 10-Sept 30)	457	866	56	1,379	16	1,395
Reconciliation to GAAP consolidated net revenues
- Net effect from deferral of net revenues						(8	)
Consolidated net revenues (GAAP)						1,387
Comparable Presentation Adjustments:
Including Activision, Inc. prior periods from July 1 to July 9, 2008
Segment net revenues	35	—	18	53
Including Activision, Inc. prior periods for the six months June 30, 2008
Segment net revenues	1,092	—	165	1,257
Non-GAAP Comparable Basis Segment Net Revenues	1,584	866	239	2,689

Nine months ended September 30, 2007	Activision (i)	Blizzard (ii)	Distribution (iii)	Core (iv)		Non-Core (v)	Segments total /Consolidated
Segment net revenues (VG only)	108	856	—	964		9	973
Reconciliation to GAAP consolidated net revenues
- Net effect from deferral of net revenues							(77	)
Consolidated net revenues (GAAP)							896
Comparable Presentation Adjustment:
Including Activision, Inc. prior periods for the nine months ended September 30, 2007
Segment net revenues	892	—	234	1,126
Non-GAAP Comparable Basis Segment Net Revenues	1,000	856	234	2,090
- Change in comparable basis — nine months ended September 30, ‘08 vs. ‘07				29	%

(i) Activision Publishing (“Activision”) —  which consists of the  historical business of Activision, Inc. publishing interactive entertainment software and peripherals, and certain studios, assets, and titles previously included in Vivendi Games’ historical “Sierra” operating segment.

(ii) Blizzard —  which consists of the business of Blizzard Entertainment, Inc. and its subsidiaries publishing of traditional games and online subscription-based games in the MMOG category.

(iii) Distribution —  which consists of the distribution of interactive entertainment software and hardware products.

(iv) Activision, Blizzard and Distribution are referred to collectively as Activision Blizzard Inc.’s core operations (“Core”).

(v) Activision Blizzard’s non-core exit operations (“Non-Core”) — which consists of legacy divisions or business units that the company has begun to exit or wind down as part of our restructuring and integration efforts as a result of the business combination.

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

For the three months ended September 30, 2008 and 2007

GAAP to non-GAAP reconciliations

Segment Information - Comparable Basis Net Revenues (amounts in millions)

Three months ended September 30, 2008	Activision (i)	Blizzard (ii)	Distribution (iii)	Core (iv)	Non-Core (v)	Segments total /Consolidated
Segment net revenues (VG July 1-Sept 30, Activision July 10-Sept 30)	364	297	56	717	6	723
Reconciliation to GAAP consolidated net revenues
- Net effect from deferral of net revenues						(12	)
Consolidated net revenues (GAAP)						711
Comparable Presentation Adjustment:
Including Activision, Inc. prior periods from July 1 to July 9, 2008
Segment net revenues	35	—	18	53
Non-GAAP Comparable Basis Segment Net Revenues	399	297	74	770

Three months ended September 30, 2007	Activision (i)	Blizzard (ii)	Distribution (iii)	Core (iv)		Non-Core (v)	Segments total /Consolidated
Segment net revenues (VG only)	43	249	—	292		3	295
Reconciliation to GAAP consolidated net revenues
- Net effect from deferral of net revenues							31
Consolidated net revenues (GAAP)							326
Comparable Presentation Adjustment:
Including Activision, Inc. prior periods for the three months ended September 30, 2007
Segment net revenues	254	—	64	318
Non-GAAP Comparable Basis Segment Net Revenues	297	249	64	610
- Change in comparable basis — three months ended September 30, ‘08 vs. ‘07				26	%

(i) Activision Publishing (“Activision”) —  which consists of the  historical business of Activision, Inc. publishing interactive entertainment software and peripherals, and certain studios, assets, and titles previously included in Vivendi Games’ historical “Sierra” operating segment.

(ii) Blizzard —  which consists of the business of Blizzard Entertainment, Inc. and its subsidiaries publishing of traditional games and online subscription-based games in the MMOG category.

(iii) Distribution —  which consists of the distribution of interactive entertainment software and hardware products.

(iv) Activision, Blizzard and Distribution are referred to collectively as Activision Blizzard Inc.’s core operations (“Core”).

(v) Activision Blizzard’s non-core exit operations (“Non-Core”) — which consists of legacy divisions or business units that the company has begun to exit or wind down as part of our restructuring and integration efforts as a result of the business combination.

Activision Blizzard Outlook

For the quarter ending December 31, 2008

GAAP to Non-GAAP reconciliation

(in millions, except earnings (loss) per share data)

	Outlook for Quarter Ending December 31, 2008
Net Revenues (GAAP)	$	1,623.0
Excluding the impacts of:
Results of products and operations that the company has begun to exit or wind down	(2.0		)(a)
Change in deferred net revenues	569.0		(b)
Non-GAAP Net Revenues	$	2,190.0
(Loss) Earnings Per Diluted Share (GAAP)	$	(0.01	)
Excluding the impacts of:
Change in deferred net revenues and cost of sales	0.17		(c)
Equity based compensation (including purchase price accounting related adjustments)	0.02		(d)
Results of products and operations that the company has begun to exit or wind down	0.01		(e)
One time costs related to the Vivendi transaction, integration, and restructuring	0.01		(f)
Amortization of intangibles and purchase price accounting related adjustments	0.09		(g)
Non-GAAP Earnings Per Diluted Share	$	0.29

(a) Reflects net revenues from the historical Vivendi Games products and businesses that the company has begun to exit or wind down.

(b) Reflects the net change in deferred net revenues.

(c) Reflects the net change in deferred net revenues and deferred cost of sales.

(d) Reflects equity based compensation costs, including the increase in fair value associated with the historical Activision, Inc. stock awards as part of the purchase price accounting adjustments. Also includes the costs of the Blizzard Entertainment equity plan and Vivendi awards to historical Vivendi Games employees.

(e) Reflects the results of products and operations from the historical Vivendi Games businesses that the company has begun to exit or wind down, and exit costs from the cancellation of projects.

(f) Includes one-time costs related to the business combination with Vivendi Games (including transaction costs, integration costs, and restructuring activities).  Restructuring activities includes severance costs and facility exit costs.

(g) Reflects amortization of intangible assets, and the increase in the fair value of inventories and associated cost of sales, all of which relate to 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.

EX-99.2

Exhibit 99.2

Portions of transcript of conference call held November 5, 2008

Following is a transcript of portions of the conference call relating to the results of operation and financial condition of Activision Blizzard, Inc. (the “Company”) for the three and nine month periods ended September 30, 2008.  Please refer to Exhibit 99.1 to this Form 8-K for reconciliations and other information regarding the Non-GAAP financial measures included below.  Exhibit 99.1 also contains additional information regarding the Company’s outlook and risk factors affecting the Company’s outlook, including risk factors relating to macroeconomic conditions.  This Exhibit 99.2 should be read in conjunction with Exhibit 99.1 and the more detailed disclosures contained in the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2008 (which was filed with the SEC on November 10, 2008).

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Kristin Southey:

Good afternoon and thank you for joining us today for Activision Blizzard’s September Quarter conference call.  As always, I will start today’s call with a review of our safe harbor disclosure, followed by comments from Bobby Kotick, CEO, Thomas Tippl, Chief Financial Officer, and Mike Griffith, President and CEO of Activision Publishing, and Mike Morhaime, President and CEO of Blizzard Entertainment.

I would like to remind everyone that statements will be made during this call that are not historical facts and are forward-looking statements.  These forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties.

The Company cautions that a number of important factors could cause Activision Blizzard’s actual future results and other future circumstances to differ materially from those expressed in any such forward looking statements. Such factors include, without limitation, sales levels of the company’s titles, shifts in consumer spending trends, the impact of the current macroeconomic environment, the seasonal and cyclical nature of the interactive game market, the company’s ability to predict consumer preferences among competing hardware platforms, declines in software pricing, product returns and price protection, product delays, retail acceptance of our products, adoption rate and availability of new hardware and related software, industry competition, rapid changes in technology and industry standards, protection of proprietary rights, litigation, maintenance of relationships with key personnel, customers, vendors and third-party developers, domestic and international economic,

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financial and political conditions and policies, foreign exchange rates, integration of recent acquisitions and the identification of suitable future acquisition opportunities, our success in integrating the operations of Activision and Vivendi Games in a timely manner, or at all, and our ability to realize the anticipated benefits and synergies of the transaction to the extent, or in the timeframe, anticipated.

These important factors and other factors that potentially could affect the Company’s financial results are described in the Company’s most recent Quarterly Report on Form 10-Q.

The Company may change its intention, belief or expectation, at any time and without notice, based upon any changes in such factors, in the Company’s assumptions or otherwise.

The Company undertakes no obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

I would also like to note that certain numbers we will be presenting today, including net revenues, operating income, earnings per share, manufacturing and distribution costs, product creation costs, sales & marketing expense and G&A spending, will be made on a Non-GAAP basis excluding the impact of the change in deferred net revenues and cost of sales; expenses related to equity-based compensation costs; the operating results of products and operations from the historical Vivendi Games businesses that the company intends to exit or wind down; one-time costs related to the business combination between Activision and Vivendi Games; the amortization of intangibles and the changes in costs of sales resulting from purchase price accounting adjustments and the associated tax benefits.

In addition, as Thomas will explain in more detail, due to the fact that our business combination is accounted for as a reverse acquisition, we will be presenting additional Non-GAAP information that includes Activision’s standalone results for the periods prior to July 9th, which we refer to as the Non-GAAP comparable basis.  Please refer to our

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earnings release, which is posted on our website at www.activisionblizzard.com, for reconciliations and further explanations.

I would also like to point out that the numbers we are providing today incorporate all adjustments made for our 2-for-1 stock split that was effective in September.

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Thomas Tippl:

Today I’ll begin with a review of Activision Blizzard’s successful first quarter as a combined company and then I will review our outlook for the balance of the calendar year.

Before I get into the numbers, I would like to remind everyone that due to the nature of reverse merger accounting our historical financials are those of Vivendi Games only. Activision’s results are only included as of the date of the merger. This means that the September GAAP results include the full quarter of Vivendi Games and the results from July 10 through September 30 for Activision. Because Activision’s historical financials can no longer be reported in our financial filings, we understand that many of you will want to consider year-over-year comparisons that go beyond the GAAP numbers until we lap the merger date.

Therefore, in order to provide a more transparent view of our comparable year over year operating results, we have included in our press release a set of schedules for the three and nine month periods for our core business which includes Activision Publishing, Blizzard Entertainment and Distribution.

In these schedules, we outline three sets of numbers on a year-over year-basis.  One set reflects our combined company GAAP results.  The second set reflects our combined company Non-GAAP results, which exclude the items and adjustments Kristin outlined at the beginning of the call, and the third set of numbers reflect our Non-GAAP numbers including Activision’s stand alone results for period prior to July 9th.  We refer to these numbers as Non-GAAP comparables and they represent an-apples to apples comparison for

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the combined company on a year-over-year basis.  These will be the numbers that I will refer to unless otherwise noted in my commentary.

In addition, we have provided a break out of our non-core Vivendi Games exit division, which we expect to completely wind down by no later than June 2009.  And as always, we have included a GAAP to Non-GAAP reconciliation in today’s press release.

So focusing on the core business results for the first nine months of the calendar year on a Non-GAAP comparable basis, you see very strong momentum with revenue growth of 29% and operating income growth of 46%.

With respect to the September quarter results Activision Blizzard’s GAAP net revenues were $711 million, significantly ahead of our prior outlook.

On a Non-GAAP comparable basis, net revenues for the quarter were $770 million a 26% increase over the prior-year comparable.  Both Activision Publishing and Blizzard Entertainment performed better than expected. For the quarter, we had no new releases and our strong performance was driven by our three wholly owned franchises World of Warcraft, Guitar Hero and Call of Duty.  In addition we launched Star Wars Force: Unleashed, an affiliate label title we publish outside the U.S.

For the quarter, we had a GAAP operating loss of $194 million and a loss per share of 8 cents. This is 5 cents better than our guidance. 3 cents is due to our core operations performing ahead of plan, and 2 cents is due to lower restructuring costs and balance sheet write offs, because we were successful in selling nearly all of the Vivendi Games assets and businesses which we decided not to retain.

Non-GAAP operating income for the quarter for the core business was $122 million. And Non-GAAP operating income on a comparable basis was $113 million.

Non-GAAP earnings per share for our first quarter as a combined company were $0.07. This is 3 cents ahead of our outlook and largely driven by the year round profit generation of Blizzard’s subscription business model while Activision, as expected, posted a small

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loss due to the lack of new mainline releases in the quarter and continued investment in our large 2009 slate.

With respect to specific line items for the core business of Activision Publishing, Blizzard and Distribution, I will refer only to Non-GAAP numbers.  In the September quarter, Non-GAAP product costs including cost of sales for MMOG’s was 44% of net revenues. This is higher than our outlook due in part to mix as we had higher affiliate revenues and we took a more conservative approach to price protection and return reserves in light of greater macro-economic uncertainty.  [In response to a later question, Mr. Tippl stated that: “On the reserves, we’ve stepped up the reserves at the end of June. On a combined basis, we were right around 29% of gross receivables.  At the end of September, we took that up to about 38% of gross receivables, so we think in light of the uncertainty that’s out there, we are appropriately and prudently positioned for the holiday season from that perspective.”]

Non-GAAP product creation costs for the core business were 19% net revenues, Non-GAAP sales and marketing expense was 13% and Non-GAAP G&A was 7% of net revenues.  In total for the quarter Non-GAAP operating expenses came in at 39% lower than expected.  The favorability was due mainly to operating leverage from higher revenues and tight cost management and higher affiliate mix.

During the quarter, we generated $24 million in investment income, and yields continued to decline as our investments are held in government backed, shorter-term securities to limit credit exposure and provide flexibility to deploy capital.  Our effective Non-GAAP tax rate was 37%.

During the quarter, we also completed a 2-for-1 stock split and we ended the quarter with a diluted share count of 1.33 Billion.

So for our first quarter as a combined company, we are off to a great start. The combined company performance is even stronger when you look at the apples to apples Non-GAAP comparable performance for the first nine months of the calendar year which is well ahead of the prior year and has extended our industry-leading operating margin advantage over other third-party publishers.  For the first nine months of the calendar year, on a combined

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company Non-GAAP comparable basis, we have generated a 21% operating margin and we have not even hit the holiday quarter, which is typically the highest margin quarter of the year.

Now turning to the balance sheet.  On September 30, we had more than $3 billion in cash and investments, an increase of $1.6 billion vs. the prior quarter, due mainly to transaction-related cash inflows.

In today’s capital market environment we view the strength of our balance sheet as a major competitive advantage. And we are planning to put the cash to work. Today, we announced that our board has authorized up to $1 billion of share repurchases to take advantage of current market conditions. In addition, we believe that the more challenging macro-economic environment could provide unique M&A opportunities for which we are well positioned with our balance sheet, our more predictable cash flow outlook resulting from Blizzard’s subscription business model and the backing of Vivendi as a shareholder.

Now, let me turn to our other key balance sheet positions.

The Accounts Receivable balance was $316 million. This is $85 million lower than last quarter’s balance for Activision stand-alone as we collected receivables from the second quarter launches of Guitar Hero: Aerosmith and Kung Fu Panda.

Inventories were $377 million. This holiday we will launch our largest sku count ever and we began building inventory in the quarter for the multi-platform, multi-instrument, multi-territory launch of Guitar Hero: World Tour and the multi-million unit releases of Call of Duty and the Wrath of the Lich King.

Capitalized software development costs were $246 million as we continued the development of our 2008 holiday slate and our large lineup for 2009.

Capitalized intellectual property costs were only $10 million, down $72 million vs. Activision stand alone last year, due to purchase price accounting adjustments. Under

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reverse merger accounting, Activision’s pre-merger IP advances had to be reclassified to intangible assets.

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Before I close, I want to provide a brief update on the progress we are making with the integration and synergy capture.  Since the deal announcement we have increased our synergy target by $50 million to a range of $100-$150 million. To date, we have managed to integrate the majority of our operations outside of Europe, while continuing to execute well on the base business as evidenced by our September quarter results. On the synergy side, we are also tracking well. By now we have already locked in a run rate of about $100 million of savings. With the European integration still ahead of us and a number of procurement negotiations still underway for 2009, we are confident that we can deliver towards the high end of our synergy target range. And finally, based on the successful disposal activities our net after tax cash restructuring costs are expected to come in well below the $100 million threshold we set at the time of the merger.

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Michael Griffith:

Before I begin reviewing the holiday quarter and beyond, I want to spend just a minute recapping accomplishments from the September quarter that build a stronger foundation for future growth and margin expansion.

First, as we integrated Vivendi Games, we made well-grounded but swift decisions to streamline our combined operations and take advantage of increased scale and purchasing power, the results of which are reflected in Thomas’ synergy update.

We retained and streamlined the two strongest Vivendi Games studios – High Moon in San Diego and Radical in Vancouver.

We shut down or sold non-strategic and underperforming intellectual property while maintaining and focusing on expanding our portfolio as we reignite two great historical

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franchises - Crash Bandicoot and Spyro.  In addition, we retained Ice Age, a strong movie related property whose next movie is scheduled in 2009.  And we also retained two new IP’s in development that show strong promise.

In addition, during the quarter, we completed the acquisition of Freestyle Games, a music-oriented developer in the U.K. to expand our European based capacity for Guitar Hero and to stimulate new music innovation.

So in summary, we tackled the integration with Vivendi Games quickly and thoroughly and added key new IP and studio resources to expand our portfolio in the months ahead.

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Michael Morhaime:

Today I’ll talk about our performance this past quarter and then I’ll discuss our plans for the rest of the year.

The September quarter was another strong one for us due to the continued performance of World of Warcraft.  Even though the quarter was bookended by competitors in the MMO space, the World of Warcraft subscriber base continued to grow. Age of Conan launched toward the end of the June quarter, and Warhammer Online came out in mid September. To date, 68% of the players who listed Age of Conan as their reason for cancellation and 46% of players who listed Warhammer as their reason for cancellation have reactivated their subscription to World of Warcraft.

World of Warcraft also managed to grow its subscribership despite the Olympics and the summer vacation period. At the end of the quarter, World of Warcraft had 1.5 million more subscribers than during the same time last year. As a result, our Non-GAAP net revenue was up 19% and our operating income was up 11% compared to last September.

The other big news for us for the quarter was that we launched World of Warcraft in Russia and Latin America. The goal of entering these markets was to grow our World of Warcraft

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business and to start building the markets in these regions for future products and opportunities. Creating an awareness of Blizzard quality within any given audience helps to grow that audience for future games. We plan to continue seeking long-term opportunities in emerging international markets in the years ahead.

Before I move on, I want to talk about one other highlight from last quarter. In August, we announced the formation of a new joint venture with NetEase for the operation of Battle.net, StarCraft II, and Warcraft III in China. NetEase is a market leader in China, and we’re looking forward to working with them. This partnership shows our continued commitment to Chinese gamers and the local industry there.

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