Blizzard 2008 Annual Report Download - page 12

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Our accomplishments in calendar year 2008 were the most significant in our company’s 29 years. We completed the largest
merger in the history of our industry; on a non-GAAP basis, we delivered record net revenues and operating income, with
double-digit growth; and we significantly strengthened our portfolio of leading entertainment franchises.
These accomplishments follow 16 years of strong performance by Activision, Inc. Since 1998, we had a cumulative average
annual growth rate in our share price of 25% as compared to the Standard & Poor’s 500, which decreased at an average
annual rate of 1%, during that same period of time. Over those 10 years, we also outperformed every other third-party
video game company in providing superior shareholder returns.
On July 9, 2008, we completed our transaction with Vivendi to create Activision Blizzard, the world’s largest and most
profitable online and console video game company. Activision Blizzard was formed by combining Activision and Vivendi
Games, Vivendi’s interactive entertainment business, which includes Blizzard Entertainment®’s top-selling PC franchises—
Warcraft®, StarCraft® and Diablo® and World of Warcraft®, the world’s #1 subscription-based massively multiplayer online
role-playing game. Activision Blizzard is now a leader in both console and subscription-based online games.
Our focus on well-defined market opportunities combined with strong global execution enabled us to deliver outstanding
financial results for calendar year 2008. In the past, we reported our results to you principally on a GAAP basis. However,
as a result of our merger, which required reverse merger accounting, Activision’s historical financial results are included from
the date of the business combination, July 9, 2008 onwards, but not for prior periods in our GAAP financial filings. In
addition, increased online functionality for certain of our PC and console games requires us to defer revenue and costs related
to the sale of these games over an estimated service period. While the adoption of this accounting treatment does not change
the economics of our business as the cash related to the sale of a game is still collected upfront, it does affect year-over-year
comparisons. As such, we review non-GAAP financial measures in managing our business and assessing our operating
performance. We understand that many of you will also want to consider year-over-year comparisons. Therefore, we believe
it is helpful for us to discuss our financial performance on a non-GAAP basis for year-over-year comparisons. A reconcilia-
tion of our GAAP to non-GAAP financial measures can be found at the back of this annual report.
For 2008, Activision Blizzard’s non-GAAP comparable-basis segment net revenues were $5 billion, marking our 17th
consecutive year of net revenue growth. We had the most profitable year in our history with non-GAAP comparable-basis
segment operating income of $1.2 billion and non-GAAP operating margin of 24%.
During the year, we successfully integrated Vivendi Games’ operations into Activision and we are on track to attain the top
end of $100–$150 million in merger integration and cost savings exceeding our original range by $50 million. We ended
2008 with approximately $3.1 billion in cash and investments and no debt, which provides us with the financial flexibility
to pursue opportunities as they arise.
In these difficult and volatile economic times, our cash gives us a competitive advantage. As we have always done, we will
use our capital wisely for the benefit of our shareholders. This includes repurchasing our common stock under our authorized
$1 billion share buy-back program. We had purchased approximately $126 million of our common stock at an average price
of $9.68, as of December 31, 2008.
In calendar 2008, Activision Blizzard excelled. Our results are due to the hard work and exceptional skills of our more
than 7,000 worldwide employees, our continued commitment to delivering quality entertainment experiences to consumers
around the world and the dedication of a solid experienced management team led by Mike Griffith, Mike Morhaime and
Bruce Hack.
Now that we have successfully completed the merger and integration of Blizzard Entertainment and Activision, Bruce Hack,
who served as our Chief Corporate Officer, has decided to return full time to New York City. He has handed over the reins
of Chief Corporate Officer to Thomas Tippl, our Chief Financial Officer. It is a great reflection on the strength of our
organization that we are able to fill Bruce’s role from our own executive team.
T O O U R S H A R E H O L D E R S :
2008 A N N U A L R E P O R T
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