Activision 2012 Annual Report Download - page 20

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2
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Business Overview
The Company’s Formation and Business Combination
Activision, Inc. was originally incorporated in California in 1979 and was reincorporated in Delaware in December 1992. 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 , and Vivendi Games, Inc.
(“Vivendi Games”), a wholly-owned subsidiary of VGAC LLC, was consummated. As a result of the consummation of the Business
Combination, Activision, Inc. was renamed Activision Blizzard, Inc. Activision Blizzard is a public company traded on the NASDAQ under the
ticker symbol “ATVI.”
Activision Blizzard, Inc. is a worldwide online, personal computer (“PC”), video game console, tablet, handheld, and mobile game
publisher. The terms “Activision Blizzard,” the “Company,” “we,” “us,” and “our” are used to refer collectively to Activision Blizzard, Inc. and
its subsidiaries. Based upon our organizational structure, we conduct our business through three operating segments as follows:
Activision Publishing, Inc.
Activision Publishing, Inc. (“Activision”) is a leading international developer and publisher of interactive software products and
content. Activision develops games based on both internally-developed and licensed intellectual property. Activision markets and sells games we
develop and, through our affiliate label program, games developed by certain third-party publishers. We sell games both through retail channels
and by digital download. Activision currently offers games that operate on the Sony Computer Entertainment, Inc. (“Sony”) PlayStation 3
(“PS3”), Nintendo Co. Ltd. (“Nintendo”) Wii (“Wii”) and Nintendo Wii U (“Wii U”), and Microsoft Corporation (“Microsoft”) Xbox 360
(“Xbox 360”) console systems; the Nintendo Dual Screen (“DS”) and Nintendo 3DS (“3DS”) handheld game systems; the PC; and other
handheld and mobile devices.
Blizzard Entertainment, Inc.
Blizzard Entertainment, Inc. (“Blizzard”) is a leader in the subscription- based massively multi-player online role-playing game
(“MMORPG”) category in terms of both subscriber base and revenues generated through its World of Warcraft® franchise, which it develops,
hosts and supports. Blizzard also develops, markets, and sells role-playing action and strategy PC-based computer games, including games in the
multiple- award winning Diablo® and StarCraft® franchises. In addition, Blizzard maintains a proprietary online-game related service, Battle.net®.
Blizzard distributes its products and generates revenues worldwide through various means, including: subscriptions (which consist of fees from
individuals playing World of Warcraft®, sales of prepaid subscription cards, and revenue from value-added services such as realm transfers,
faction changes and other character customizations within the World of Warcraft gameplay); retail sales of physical “boxed” products; online
download sales of PC products; and licensing of software to third-party or related party companies that distribute World of Warcraft, Diablo® III
and StarCraft® II products.
Activision Blizzard Distribution
Activision Blizzard Distribution (“Distribution”) consists of operations in Europe that provide warehousing, logistical and sales
distribution services to third-party publishers of interactive entertainment software, our own publishing operations, and manufacturers of
interactive entertainment hardware.
Business Results and Highlights
In 2012, Activision Blizzard’s consolidated net revenues were $4.9 billion and consolidated net income was $1.1 billion, resulting in
diluted earnings per common share of $1.01. The Company grew net revenues, operating income, and earnings per share as compared to 2011.
We also generated $1.3 billion in cash from operating activities in 2012.
Also, according to The NPD Group with respect to North America, GfK Chart- Track with respect to Europe, and Activision Blizzard
internal estimates, during 2012: