Activision Blizzard (ATVI) 10-Q 7 May 10 2010 Q1 Quarterly report Financial data

CONDENSED CONSOLIDATED BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)
In Millions	3 Months Ended Mar. 31, 2010	12 Months Ended Dec. 31, 2009
Current assets:
Cash and cash equivalents	$2,695	$2,768
Short-term investments	647	477
Accounts receivable, net of allowances of $225 million and $317 million at March 31, 2010 and December 31, 2009, respectively	134	739
Inventories	194	241
Software development	217	224
Intellectual property licenses	40	55
Deferred income taxes, net	395	498
Other current assets	164	327
Total current assets	4,486	5,329
Long-term investments	23	23
Software development	4	10
Intellectual property licenses	29	28
Property and equipment, net	131	138
Other assets	11	9
Intangible assets, net	599	618
Trademark and trade names	433	433
Goodwill	7,150	7,154
Total assets	12,866	13,742
Current liabilities:
Accounts payable	147	302
Deferred revenues	772	1,426
Accrued expenses and other liabilities	623	779
Total current liabilities	1,542	2,507
Deferred income taxes, net	254	270
Other liabilities	202	209
Total liabilities	1,998	2,986
Commitments and contingencies (Note 13)
Shareholders' equity:
Common stock, $.000001 par value, 2,400,000,000 shares authorized, 1,366,914,039 and 1,364,117,675 shares issued at March 31, 2010 and December 31, 2009, respectively	0	0
Additional paid-in capital	12,234	12,376
Less: Treasury stock, at cost, 123,506,345 and 113,686,498 at March 31, 2010 and December 31, 2009, respectively	(1,342)	(1,235)
Retained earnings (accumulated deficit)	20	(361)
Accumulated other comprehensive loss	(44)	(24)
Total shareholders' equity	10,868	10,756
Total liabilities and shareholders' equity	$12,866	$13,742

1_CONDENSED CONSOLIDATED BALANC

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
In Millions, except Share data	Mar. 31, 2010	Dec. 31, 2009
CONDENSED CONSOLIDATED BALANCE SHEETS
Accounts receivable, allowances (in dollars)	$225	$317
Common stock, par value (in dollars per share)	0.000001	0.000001
Common stock, shares authorized	2,400,000,000	2,400,000,000
Common stock, shares issued	1,366,914,039	1,364,117,675
Treasury stock, shares	123,506,345	113,686,498

CONDENSED CONSOLIDATED STATEMEN

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
In Millions, except Per Share data	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
Net revenues
Product sales	$986	$690
Subscription, licensing, and other revenues	322	291
Total net revenues	1,308	981
Costs and expenses
Cost of sales - product costs	337	296
Cost of sales - software royalties and amortization	99	72
Cost of sales - intellectual property licenses	43	64
Cost of sales - massively multi-player online role-playing game ("MMORPG")	54	52
Product development	143	117
Sales and marketing	56	83
General and administrative	65	103
Restructuring		15
Total costs and expenses	797	802
Operating income	511	179
Investment and other income, net		10
Income before income tax expense	511	189
Income tax expense	130
Net income	$381	$189
Earnings per common share
Basic (in dollars per share)	0.3	0.14
Diluted (in dollars per share)	0.3	0.14
Weighted average number of shares outstanding
Basic (in shares)	1,248	1,308
Diluted (in shares)	1,264	1,359
Dividends declared per common share (in dollars per share)	0.15

2_CONDENSED CONSOLIDATED STATEM

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Millions	3 Months Ended Mar. 31, 2010		3 Months Ended Mar. 31, 2009
Cash flows from operating activities:
Net income	$381		$189
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income taxes	90		56
Depreciation and amortization	33		69
Unrealized gain on auction rate securities classified as trading securities			(3)
Unrealized loss on ARS rights from UBS			3
Amortization and write-off of capitalized software development costs and intellectual property licenses (1)	88	[1]	68	[1]
Stock-based compensation expense (2)	44	[2]	30	[2]
Excess tax benefits from stock option exercises	(4)		(17)
Changes in operating assets and liabilities:
Accounts receivable	593		794
Inventories	40		32
Software development and intellectual property licenses	(80)		(75)
Other assets	162		(5)
Deferred revenues	(637)		(276)
Accounts payable	(146)		(160)
Accrued expenses and other liabilities	(337)		(378)
Net cash provided by operating activities	227		327
Cash flows from investing activities:
Capital expenditures	(12)		(10)
Proceeds from maturities of investments	17		1
Proceeds from sale of available-for-sale investments			2
Payment of contingent consideration	(2)
Purchases of short-term investments	(187)
Net cash used in investing activities	(184)		(7)
Cash flows from financing activities:
Proceeds from issuance of common stock to employees	16		7
Repurchase of common stock	(107)		(313)
Excess tax benefits from stock option exercises	4		17
Net cash used in financing activities	(87)		(289)
Effect of foreign exchange rate changes on cash and cash equivalents	(29)		(1)
Net (decrease) increase in cash and cash equivalents	(73)		30
Cash and cash equivalents at beginning of period	2,768		2,958
Cash and cash equivalents at end of period	$2,695		$2,988
[1]Excludes deferral and amortization of stock-based compensation expense.
[2]Includes the net effects of capitalization, deferral, and amortization of stock-based compensation expense.

3_CONDENSED CONSOLIDATED STATEM

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (USD $)
In Millions	Common Stock	Additional Paid-In Capital	Treasury Stock	Retained Earnings (Accumulated Deficit)	Accumulated Other Comprehensive Loss	Total
Balance at Dec. 31, 2009		$12,376	($1,235)	($361)	($24)	$10,756
Balance (in shares) at Dec. 31, 2009	1,364		(114)
Components of comprehensive income:
Net income				381		381
Foreign currency translation adjustment					(20)	(20)
Total comprehensive income						361
Issuance of common stock pursuant to employee stock options and restricted stock rights		16				16
Issuance of common stock pursuant to employee stock options and restricted stock rights (in shares)	3
Stock-based compensation expense related to employee stock options and restricted stock rights		31				31
Dividends declared ($0.15 per common share)		(189)				(189)
Shares repurchased			(107)			(107)
Shares repurchased (in shares)			(10)
Balance at Mar. 31, 2010		$12,234	($1,342)	$20	($44)	$10,868
Balance (in shares) at Mar. 31, 2010	1,367		(124)

4_CONDENSED CONSOLIDATED STATEM

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (Parenthetical) (USD $)
	3 Months Ended Mar. 31, 2010
Dividends declared per common share (in dollars per share)	0.15

Description of Business and Bus

Description of Business and Business Combination
	3 Months Ended Mar. 31, 2010
Description of Business and Business Combination
Description of Business and Business Combination	1. Description of Business and Business Combination Description of Business Activision Blizzard,Inc. is a worldwide online, personal computer (PC), console and handheld game publisher. The terms Activision Blizzard, the Company, we, us, and our are used to refer collectively to Activision Blizzard,Inc. and its subsidiaries. In 2008, a business combination (the Business Combination) by and among Activision,Inc., Sego Merger Corporation, a wholly-owned subsidiary of Activision,Inc., VivendiS.A. (Vivendi), VGACLLC, a wholly-owned subsidiary of Vivendi, and Vivendi Games,Inc. (Vivendi Games), a wholly-owned subsidiary of VGACLLC was consummated. As a result of the consummation of the Business Combination, Activision,Inc. was renamed Activision Blizzard,Inc. (Activision Blizzard). The common stock of Activision Blizzard is traded on NASDAQ under the ticker symbol ATVI. Vivendi owned approximately 58% of Activision Blizzards outstanding common stock at March31, 2010. We maintain significant operations in the United States, Canada, the United Kingdom (U.K.), France, Germany, Italy, Spain, Australia, Sweden, South Korea, Norway, Denmark, China, and the Netherlands. Basis of Consolidation and Presentation Activision Blizzard prepared the accompanying unaudited condensed consolidated financial statements in accordance with the rulesand regulations of the Securities and Exchange Commission for interim reporting. As permitted under those rulesand regulations, certain notes or other information that are normally required by accounting principles generally accepted in the United States of America (U.S. GAAP) have been condensed or omitted if they substantially duplicate the disclosures contained in the annual audited consolidated financial statements. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form10-K for the year ended December31, 2009. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation of our financial position and results of operations in accordance with U.S. GAAP have been included. The accompanying unaudited condensed consolidated financial statements include the accounts and operations of Activision Blizzard. All intercompany accounts and transactions have been eliminated. The condensed consolidated financial statements have been prepared in conformity with U.S. GAAP. The preparation of the condensed consolidated financial statements in conformity with U.S.GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements. Actual results could differ from these estimates and assumptions. The prior year condensed consolidated statement of cash flows for the period ended March31, 2009 has been adjusted to correct immaterial errors related to the elimination of intercompany receivables and payables in the consolidated balance sheets at March31, 2009 and December31, 2008 (not included herein). The corrections reduced the acco

Inventories

Inventories
	3 Months Ended Mar. 31, 2010
Inventories
Inventories	2. Inventories Our inventories consist of the following (amounts in millions): AtMarch31,2010 AtDecember31,2009 Finished goods $ 161 $ 201 Purchased parts and components 33 40 $ 194 $ 241

Intangible assets, net

Intangible assets, net
	3 Months Ended Mar. 31, 2010
Intangible assets, net
Intangible assets, net	3. Intangible assets, net Intangible assets, net consist of the following (amounts in millions): AtMarch31,2010 Estimated useful lives Gross carrying amount Accumulated amortization Netcarrying amount Acquired definite-lived intangible assets: License agreements 3 - 10years $ 173 $ (68 ) $ 105 Game engines 2 - 5years 61 (37 ) 24 Internally developed franchises 11 - 12years 574 (111 ) 463 Favorable leases 1 - 4years 5 (4 ) 1 Distribution agreements 4years 18 (12 ) 6 Acquired indefinite-lived intangible assets: Activision trademark Indefinite 386 386 Acquired trade names Indefinite 47 47 Total $ 1,264 $ (232 ) $ 1,032 At December31, 2009 Estimated useful lives Gross carrying amount Accumulated amortization Net carrying amount Acquired definite-lived intangible assets: License agreements 3 - 10years $ 173 $ (65 ) $ 108 Developed software 1-2years 288 (288 ) Game engines 2 - 5years 61 (33 ) 28 Internally developed franchises 11 - 12years 574 (101 ) 473 Favorable leases 1 - 4years 5 (4 ) 1 Distribution agreements 4years 18 (10 ) 8 Other intangibles 0-2years 5 (5 ) Acquired indefinite-lived intangible assets: Activision trademark Indefinite 386 386 Acquired trade names Indefinite 47 47 Total $ 1,557 $ (506 ) $ 1,051 Amortization expense of intangible assets was $18 million and $49 million for the three months ended March31, 2010 and 2009, respectively. The gross carrying amount as of March 31, 2010 and December 31, 2009 in the tables above reflect a new cost basis for license agreements, game engines and internally developed franchises due to impairment charges taken for the year ended December 31, 2009. The new cost basis includes the original gross carrying amount, less accumulated amortization and impairment charges of the impaired assets as of December 31, 2009. At March31, 2010, future amortization of definite-lived intangible assets is estimated as follows (amounts in millions): 2010 (remaining nine months) $ 101 2011 96 2012 87 2013 62 2014 54 Thereafter 199 Total $ 599

Income taxes

Income taxes
	3 Months Ended Mar. 31, 2010
Income taxes
Income taxes	4. Income taxes The income tax expense of $130 million for the three months ended March31, 2010 reflects an effective tax rate of 25%. The effective tax rate of 25% for the three months ended March31, 2010 differs from the statutory rate of 35% primarily due to foreign income taxes provided at lower rates, geographic mix in profitability, recognition of California research and development credits and IRC 199 domestic production deductions. We did not record a tax benefit for federal research credits during the quarter ended March31, 2010 since as of March31, 2010, unlike in past years, the federal research credit extension had not yet been signed into law. For the three months ended March31, 2010, the tax rate is based on our projected annual effective tax rate for 2010, and also includes certain discrete tax items recorded during the period. Our tax expense of $130 million for the three months ended March31, 2010 reflects an effective tax rate of 25% which differs from the effective tax rate of 0% for the three months ended March31, 2009 primarily due to tax benefits recorded during the prior period related to the release of valuation allowances on foreign net operating losses and the impact of changes to California tax laws.

Software development and intell

Software development and intellectual property licenses
	3 Months Ended Mar. 31, 2010
Software development and intellectual property licenses
Software development and intellectual property licenses	5. Software development and intellectual property licenses The following table summarizes the components of our software development and intellectual property licenses (amounts in millions): At March31, AtDecember31, 2010 2009 Internally developed software costs $ 160 $ 182 Payments made to third-party software developers 61 52 Total software development costs $ 221 $ 234 Intellectual property licenses $ 69 $ 83 Amortization, write-offs and impairments are comprised of the following (amounts in millions): ThreemonthsendedMarch31, 2010 2009 Amortization of capitalized software development costs and intellectual property licenses $ 101 $ 72 Write-offs and impairments 15

Comprehensive income and accumu

Comprehensive income and accumulated other comprehensive loss
	3 Months Ended Mar. 31, 2010
Comprehensive income and accumulated other comprehensive loss
Comprehensive income and accumulated other comprehensive loss	6. Comprehensive income and accumulated other comprehensive loss Comprehensive Income The components of comprehensive income for the three months ended March31, 2010 and 2009 were as follows (amounts in millions): ThreemonthsendedMarch31, 2010 2009 Net income $ 381 $ 189 Other comprehensive loss: Foreign currency translation adjustment (20 ) (2 ) Unrealized depreciation on investments, net of taxes (1 ) Other comprehensive loss (20 ) (3 ) Comprehensive income $ 361 $ 186 The components of accumulated other comprehensive loss at March31, 2010 and December31, 2009 were as follows (amounts in millions): AtMarch31, AtDecember31, 2010 2009 Foreign currency translation adjustment $ (42 ) $ (22 ) Unrealized depreciation on investments, net of deferred income taxes of $(2) for March31, 2010 and December31, 2009 (2 ) (2 ) Accumulated other comprehensive loss $ (44 ) $ (24 ) Income taxes were not provided for foreign currency translation items as these are considered indefinite investments in non-U.S. subsidiaries.

Cash and Cash Equivalents

Cash and Cash Equivalents
	3 Months Ended Mar. 31, 2010
Cash and Cash Equivalents
Cash and Cash Equivalents	7. Cash and Cash Equivalents Cash and cash equivalents primarily consist of deposits held at major banks and money market funds with original maturities of three months or less at the date of purchase. The following table summarizes the components of our cash and cash equivalents (amounts in millions): AtMarch31, AtDecember31, 2010 2009 Cash and time deposits $ 294 $ 464 Securities with original maturities of three months or less 40 Money market funds 2,361 2,304 Total cash and cash equivalents $ 2,695 $ 2,768

Fair value measurements

Fair value measurements
	3 Months Ended Mar. 31, 2010
Fair value measurements
Fair value measurements	8. Fair value measurements Fair Value Measurements on a Recurring Basis FASB literature regarding fair value measurements for financial and non-financial assets and liabilities establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows: Level1Quoted prices in active markets for identical assets or liabilities. Level2Observable inputs other than quoted prices included in Level1, such as quoted prices for similar assets or liabilities in active markets or other inputs that are observable or can be corroborated by observable market data. Level3Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. The table below segregates all assets and liabilities that are measured at fair value on a recurring basis (which means they are so measured at least annually) into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date (amounts in millions): FairValueMeasurementsat ReportingDateUsing Asof March31, Quoted Pricesin Active Marketsfor Identical Financial Instruments Significant Other Observable Inputs Significant Unobservable Inputs BalanceSheet 2010 (Level1) (Level2) (Level3) Classification Financial assets: Money market funds $ 2,361 $ 2,361 $ $ Cash and cash equivalents Securities with original maturities of three months or less 40 40 Cash and cash equivalents Mortgage backed securities 1 1 Short-term investments Auction rate securities held through UBS 54 54 Short-term investments U.S.government agency securities 560 560 Short-term investments Auction rate securities held through Morgan Stanley Smith BarneyLLC 23 23 Long-term investments ARS rights from UBS(a) 7 7 Other assetscurrent Total financial assets at fair value $ 3,046 $ 2,961 $ 1 $ 84 Financial liabilities: Other financial liability $ (23 ) $ $ $ (23 ) Other liabilitiescurrent Total financial liabilities at fair value $ (23 ) $ $ $ (23 ) FairValueMeasurementsat ReportingDateUsing Asof December31, Quoted Pricesin Active Marketsfor Identical Financial Instruments Significant Other Observable Inputs Significant Unobservable Inputs BalanceSheet 2009 (Level1) (Level2) (Level3) Classification Financial assets: Money market funds $ 2,304 $ 2,304 $ $ Cash and cash equivalents Mortgage backed securities 2 2 Short-term investments Auction rate securities held through UBS 54 54 Sho

Operating segments and geograph

Operating segments and geographic region
	3 Months Ended Mar. 31, 2010
Operating segments and geographic region
Operating segments and geographic region	9. Operating segments and geographic region Our operating segments are consistent with our internal organizational structure, the manner in which our operations are reviewed and managed by our Chief Executive Officer, our Chief Operating Decision Maker (CODM), the manner in which operating performance is assessed and resources are allocated, and the availability of separate financial information. We do not aggregate operating segments. Currently, we operate under three operating segments: Activision Publishing,Inc. Activision Publishing,Inc. (Activision) is a leading international publisher of interactive software products and peripherals. Activision develops and publishes video games on various consoles, handheld platforms and the PC platform through internally developed franchises and license agreements. Activision currently offers games that operate on the Sony Computer Entertainment,Inc. (Sony) PlayStation 2 (PS2), Sony PlayStation 3 (PS3), NintendoCo.Ltd. (Nintendo) Wii (Wii), and Microsoft Corporation (Microsoft) Xbox360 (Xbox360) console systems; the Sony PlayStation Portable (PSP) and Nintendo Dual Screen (NDS) handheld devices; the PC; the Apple iPhone; and the handheld game system Nintendo DSi. Our Activision business involves the development, marketing, and sale of products directly, by license, or through our affiliate label program with certain third-party publishers. Activisions products cover diverse game categories including action/adventure, action sports, racing, role-playing, simulation, first-person action, music, and strategy. Activisions target customer base ranges from casual players to core gamers, and children to adults. Blizzard Entertainment,Inc. Blizzard Entertainment,Inc. (Blizzard) is a leader in terms of subscriber base and revenues generated in the subscription-based massively multi-player online role-playing game (MMORPG) category. Blizzard internally develops and publishes PC-based computer games and maintains its proprietary online-game related service, Battle.net. Our Blizzard business involves the development, marketing, sales and support of role playing action and strategy games. Blizzard also develops, hosts, and supports its online subscription-based games in the MMORPG category. Blizzard is the development studio and publisher best known as the creator of World of Warcraft and the multiple award winning Diablo, StarCraft, and World of Warcraft franchises. Blizzard distributes its products and generates revenues worldwide through various means, including: subscription revenues (which consist of fees from individuals playing World of Warcraft, prepaid cards and other value added service revenues); retail sales of physical boxed products; electronic download sales of PC products; and licensing of software to third-party, or related party companies that distribute World of Warcraft in Russia, China, and Taiwan. 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 oper

Goodwill

Goodwill
	3 Months Ended Mar. 31, 2010
Goodwill
Goodwill	10. Goodwill The changes in the carrying amount of goodwill by operating segment for the three months ended March31, 2010 are as follows (amounts in millions): Activision Blizzard Distribution Total Balance at December31, 2009 $ 6,964 $ 178 $ 12 $ 7,154 Tax benefit credited to goodwill (4 ) (4 ) Balance at March31, 2010 $ 6,960 $ 178 $ 12 $ 7,150 The tax benefit credited to goodwill represents the tax deduction resulting from the exercise of stock options that were outstanding and vested at the consummation of the Business Combination and included in the purchase price of Activision,Inc. to the extent that the tax deduction did not exceed the fair value of those options. Conversely, to the extent that the tax deduction did exceed the fair value of those options, the tax benefit is credited to additional paid in capital.

Computation of basic/diluted ea

Computation of basic/diluted earnings per common share
	3 Months Ended Mar. 31, 2010
Computation of basic/diluted earnings per common share
Computation of basic/diluted earnings per common share	11. Computation of basic/diluted earnings per common share The following table sets forth the computation of basic and diluted earnings per common share (amounts in millions, except per share data): ThreemonthsendedMarch31, 2010 2009 Numerator: Consolidated net income $ 381 $ 189 Less: Distributed earnings to common shareholders (187 ) Less: Distributed earnings to unvested share-based awards that participate in earnings (2 ) Undistributed earnings 192 189 Less: Undistributed earnings allocated to unvested share-based awards that participate in earnings (1 ) (1 ) Undistributed earnings allocated to common shareholders 191 188 Add back: Distributed earnings to common shareholders 187 Numerator for basic and diluted earnings per common share - income available to common shareholders 378 188 Denominator: Denominator for basic earnings per common share - weighted-average common shares outstanding 1,248 1,308 Effect of potential dilutive common shares under the treasury stock method: Employee stock options 16 51 Denominator for diluted earnings per common share - weighted-average common shares outstanding plus dilutive effect of employee stock options 1,264 1,359 Basic earnings per common share $ 0.30 $ 0.14 Diluted earnings per common share $ 0.30 $ 0.14 Our unvested restricted stock rights (including restricted stock units, restricted stock awards, and performance shares) are considered participating securities since these securities have non-forfeitable rights to dividends or dividend equivalents during the contractual period of the award. Since the unvested restricted stock rights are considered participating securities, we are required to use the two-class method in our computation of basic and diluted earnings per common share. For the three months ended March31, 2010 and 2009, we had outstanding unvested restricted stock rights of 11million and 10 million shares of common stock on a weighted-average basis, respectively. Potential common shares are not included in the denominator of the diluted earnings per common share calculation when inclusion of such shares would be anti-dilutive. Therefore, options to acquire 23 million shares of common stock were not included in the calculation of diluted earnings per common share for the three months ended March31, 2010 and 2009, as the effect of their inclusion would be anti-dilutive.

Capital transactions

Capital transactions
	3 Months Ended Mar. 31, 2010
Capital transactions
Capital transactions	12. Capital transactions Repurchase Program On November5, 2008, we announced that our Board of Directors authorized a stock repurchase program under which we were able to repurchase up to $1billion of our common stock. On July31, 2009, our Board of Directors authorized an increase of $250million to the stock repurchase program bringing the total authorization to $1.25billion. On February10, 2010, we announced that our Board of Directors authorized a new stock repurchase program under which we may repurchase up to $1billion of our common stock until the earlier of December31, 2010 or our Board of Directors determines to discontinue the repurchase program. In January2010, we settled a $15 million purchase of 1.3million shares of our common stock that we had agreed to repurchase in December2009 pursuant to the $1.25 billion stock repurchase program, completing that program. The remaining purchases of 8.5 million shares of our common stock for $92 million were made pursuant to the new $1 billion stock repurchase program. On February10, 2010 Activision Blizzards Board of Directors declared a cash dividend of $0.15 per common share payable on April2, 2010 to shareholders of record at the close of business on February22, 2010.

Commitments and contingencies

Commitments and contingencies
	3 Months Ended Mar. 31, 2010
Commitments and contingencies
Commitments and contingencies	13. Commitments and contingencies At March31, 2010, we did not have any significant changes to our commitments since December31, 2009. See Note18 of the Notes to Consolidated Financial Statements included in Item8 of the Annual Report on Form10-K for the year ended December31, 2009 for more information regarding our commitments. Legal Proceedings On February8, 2008, the Wayne County Employees Retirement System filed a lawsuit challenging the Business Combination in the Delaware Court of Chancery. The suit is a putative class action filed against the parties to the Business Combination Agreement as well as certain current and former members of our Board of Directors. The plaintiff alleged, among other things, that our current and former directors named therein failed to fulfill their fiduciary duties with regard to the Business Combination by surrendering the negotiating process to conflicted management, that those breaches were aided and abetted by Vivendi and those of its subsidiaries named in the complaint, and that the preliminary proxy statement filed by the Company on January31, 2008 contains certain statements that the plaintiff alleges are false and misleading. The plaintiff sought an order from the court that, among other things, certifies the case as a class action, enjoins the Business Combination, requires the defendants to disclose all material information, declares that the Business Combination is in breach of the directors fiduciary duties and therefore unlawful and unenforceable, awards the plaintiff and the putative class damages for all profits and special benefits obtained by the defendant in connection with the Business Combination and tender offer, and awards the plaintiff its cost and expense, including attorneys fees. After various initial motions were filed and ruled upon, on May8, 2008, the plaintiff filed an amended complaint that, among other things, added allegations relating to a revised preliminary proxy statement filed by the Company on April30, 2008. Additional motions were then filed, including a motion for preliminary injunction filed by the plaintiff and a motion to dismiss filed by Vivendi and its subsidiaries. On June14, 2008, the plaintiff filed a motion for leave to filea second amended complaint. On June30, 2008, the court granted Vivendi and its subsidiaries motion to dismiss, pursuant to a stipulation with the plaintiff, and on July1, 2008, denied the plaintiffs motion for preliminary injunction. On December23, 2008, the plaintiff filed an amended motion for leave to filea second amended complaint. The court granted the motion on January14, 2009 and the second amended complaint was deemed filed on the same date. The second amended complaint asserts claims similar to the ones made in the original complaint, challenging Activisions Board of Directors actions in connection with the negotiation and approval of the Business Combination, as well as disclosures made to our stockholders and certain amendments made to our certificate of incorporation in connection therewith. In addition, the second amended complaint asserts that Activisions Board of Directors breached its fiduciary duties in

Related party transactions

Related party transactions
	3 Months Ended Mar. 31, 2010
Related party transactions
Related party transactions	14. Related party transactions Treasury Our foreign currency risk management program seeks to reduce risks arising from foreign currency fluctuations. We use derivative financial instruments, primarily currency forward contracts and swaps, with Vivendi as our principal counterparty. The gross notional amount of outstanding foreign exchange swaps was $321million at March31, 2010. The gross notional amount of outstanding foreign exchange swaps was $120million at December31, 2009. A pre-tax net unrealized loss of less than amillion and loss of $4million for the three months ended March31, 2010 and 2009, respectively, resulted from the foreign exchange contracts and swaps with Vivendi and were recognized in the condensed consolidated statements of operations. Other Activision Blizzard has entered into various transactions and agreements, including cash management services, investor agreement, credit facilities arrangement and music royalty agreements with Vivendi and its subsidiaries and affiliates. None of these services, transactions and agreements with Vivendi and its subsidiaries and affiliates are material either individually or in the aggregate to the condensed consolidated financial statements as a whole.

Recently issued accounting pron

Recently issued accounting pronouncements
	3 Months Ended Mar. 31, 2010
Recently issued accounting pronouncements
Recently issued accounting pronouncements	15. Recently issued accounting pronouncements In October2009, the FASB issued an update to Revenue RecognitionMultiple-Deliverable Revenue Arrangements. This update establishes the accounting and reporting guidance for arrangements including multiple revenue-generating activities. This update provides amendments to the criteria for separating deliverables, measuring and allocating arrangement consideration to one or more units of accounting. The amendments in this update also establish a selling price hierarchy for determining the selling price of a deliverable. Significantly enhanced disclosures are also required to provide information about a vendors multiple-deliverable revenue arrangements, including information about the nature and terms, significant deliverables, and its performance within arrangements. The amendments also require providing information about the significant judgments made and changes to those judgments and about how the application of the relative selling-price method affects the timing or amount of revenue recognition. The amendments in this update are effective prospectively for revenue arrangements entered into or materially modified in the fiscal years beginning on or after June15, 2010. Early adoption is permitted. We are currently evaluating the impact, if any, of this new accounting update on our consolidated financial statements. In October2009, the FASB issued an update to SoftwareCertain Revenue Arrangements That Include Software Elements. This update changes the accounting model for revenue arrangements that include both tangible products and software elements that are essential to the functionality, and excludes these products from the scope of current software revenue guidance. The new guidance will include factors to help companies determine which software elements are considered essential to the functionality. The amendments will now subject software-enabled products to other revenue guidance and disclosure requirements, such as guidance surrounding revenue arrangements with multiple- deliverables. The amendments in this update are effective prospectively for revenue arrangements entered into or materially modified in the fiscal years beginning on or after June15, 2010 although early adoption is permitted. We are currently evaluating the impact, if any, of this new accounting update on our consolidated financial statements.

Document and Entity Information

Document and Entity Information
	3 Months Ended Mar. 31, 2010	Apr. 30, 2010
Document and Entity Information
Entity Registrant Name	Activision Blizzard, Inc.
Entity Central Index Key	0000718877
Document Type	10-Q
Document Period End Date	2010-03-31
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		1,243,905,768
Document Fiscal Year Focus	2,010
Document Fiscal Period Focus	Q1