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ACTIVISION BLIZZARD (ATVI)
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Activision Blizzard : Cuts Ties To Hit 'Destiny' Game and Studio

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01/11/2019 | 02:48am EST

By Sarah E. Needleman

Activision Blizzard Inc. is cutting ties with the videogame studio behind one of its biggest hits, a surprise move that knocked its stock down more than 6.5% and adds to questions about whether the company has a robust enough slate of games for 2019.

Bungie Inc., the Bellevue, Wash., development studio responsible for the science-fiction shooter "Destiny," is purchasing the publishing rights for the franchise, Activision Blizzard said Thursday. Terms of the deal weren't disclosed.

The two had a partnership dating back to 2010. Neither company discloses sales for Destiny, but Activision Blizzard executives in November told analysts the latest content released for the series didn't live up to the company's expectations.

Some analysts had already raised concerns about Activision Blizzard's release slate for the year, particularly after its Blizzard Entertainment division announced no new games at its annual convention in November. Destiny was published by the company's Activision unit.

The loss of Destiny fanned those concerns. "This move will create a void across Activision Publishing's content pipeline, which we had presumed would include a Destiny sequel in 2020," Stifel analysts wrote. Still, the analysts said they expect the financial impact to be limited.

Activision Blizzard, the largest U.S. game publisher by market value, said in a securities filing that it doesn't expect to recognize "material revenue, operating income or operating loss" from the absence of Destiny in 2019.

Shares of Activision Blizzard rose 1% Thursday to $51.35 before sinking after hours. Videogame stocks have soared in recent years as revenue swelled from an explosion in sales of easily downloaded, high-margin digital content that game makers pump out continuously.

After years of running up, the stocks have slumped along with the broader tech market. Activision Blizzard lost 26% in 2018, while Electronic Arts Inc. fell 25%. Take-Two Interactive Software Inc. better weathered the selloff, sliding 6.2% for the year.

In a separate statement, Activision Blizzard said it plans to focus on its own studios' games and other projects. It has worked in the past year to build its shooter "Overwatch" into a viable, long-term competitive gaming league.

News of the separation follows an executive shake-up at Activision Blizzard. Finance chief Spencer Neumann left to take the same job at Netflix Inc. Meantime, Amrita Ahuja, chief financial officer of the Blizzard unit, is taking the CFO job at Square Inc. Separately, Blizzard co-founder Michael Morhaime resigned in October as president of the unit.

Bungie said in a blog post that it would continue to release content for Destiny. In June the studio said it had received a $100 million investment from China's NetEase Inc. and planned to use the money to create new games it will self-publish.

Write to Sarah E. Needleman at sarah.needleman@wsj.com

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Financials ($)
Sales 2018 7 455 M
EBIT 2018 2 518 M
Net income 2018 1 727 M
Finance 2018 2 157 M
Yield 2018 0,69%
P/E ratio 2018 22,66
P/E ratio 2019 23,21
EV / Sales 2018 4,69x
EV / Sales 2019 4,42x
Capitalization 37 122 M
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Mean consensus OUTPERFORM
Number of Analysts 30
Average target price 64,6 $
Spread / Average Target 33%
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Managers
NameTitle
Robert A. Kotick Chief Executive Officer & Director
Rob Kostich President
Brian G. Kelly Chairman
Collister Johnson Chief Operating Officer
Dennis M. Durkin CFO & President-Emerging Businesses
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