Blizzard 2004 Annual Report Download - page 52

have further enabled us to implement our multi-platform development strategy by bolstering our internal product devel-
opment capabilities for console systems and personal computers and strengthening our position in the first-person
action, action and action sports game categories. A significant portion of the purchase price for all of these acquisitions
was assigned to goodwill as the primary asset we acquired in each of the transactions was an assembled workforce
with proven technical and design talent with a history of high quality product creation. Pro forma consolidated state-
ments of operations for these acquisitions are not shown, as they would not differ materially from reported results.
Fiscal 2004 Transactions
Acquisition of Infinity Ward. In May 2002, we acquired a 30% interest in the outstanding capital stock of Infinity Ward,
Inc. (“Infinity Ward”), a privately held interactive software development company, as well as an option to purchase
the remaining 70% of outstanding capital stock. In October 2003, we exercised our option to acquire the remaining
70% of the outstanding capital stock of Infinity Ward for cash of approximately $3.5 million. Goodwill of approxi-
mately $3.8 million has been included in the publishing segment of our business and is non-deductible for tax purposes.
The results of operations of Infinity Ward are included in our consolidated statement of operations beginning October
24, 2003.
Fiscal 2003 Transactions
Acquisition of Luxoflux. Effective October 4, 2002, we acquired all of the outstanding ownership interests of Luxoflux,
Inc. (“Luxoflux”), a privately held interactive software development company, in exchange for $9.0 million in cash.
Luxoflux is an experienced, multi-platform, console software developer. In accordance with the original acquisition agree-
ment, approximately 248,000 shares of our common stock may be issued to Luxoflux’s equity holders over the course
of several years, depending on the satisfaction of certain product performance requirements and other criteria. This
contingent consideration will be recorded as an additional element of the purchase price for Luxoflux when those
contingencies are resolved.
In the fourth quarter of fiscal 2004, certain of these product performance requirements were met and approximately
166,000 of our common shares with an assigned value of approximately $2.0 million were issued to Luxoflux equity
holders. The purchase price of the transaction, including acquisition costs and the contingent consideration issued in
the fourth quarter of fiscal 2004, was approximately $11.0 million and has been allocated to assets acquired and
liabilities assumed as follows (amounts in thousands):
Current assets $1,461
Property and equipment 83
Other assets 15
Goodwill 12,360
Current liabilities (2,892)
$11,027
Acquisition of Z-Axis
Effective May 20, 2002, we acquired all of the outstanding ownership interests of Z-Axis, Ltd. (“Z-Axis”), a privately
held interactive software development company, in exchange for $12.5 million in cash and 560,678 shares of our
common stock valued at approximately $8.2 million. Z-Axis is an experienced, multi-platform, console software devel-
oper. In accordance with the original acquisition agreement, approximately 210,000 additional shares of our common
stock may be issued to Z-Axis’ equity holders over the course of several years, depending on the satisfaction of certain
product performance requirements and other criteria. This contingent consideration will be recorded as an additional
element of the purchase price for Z-Axis when those contingencies are resolved.
Activision, Inc. — 2004 Annual Report
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