Earlier this month we saw a rash of reports that Vivendi, the parent company of Activision/Blizzard, was considering selling them off. Though ATVI is quite profitable, Vivendi’s primary businesses are in fields like cable television, telecommunications, utilities, and other industries that involve physical infrastructures in Europe. They don’t really do gaming other than via Activision/Blizzard, and the thought is that they’d be selling high with Modern Warfare still very popular (though many expect it to to crash and burn from Bobby-driven overexposure, as most of Activision’s other cash cow franchises have), WoW still near its peak, D3 breaking sales records, and a handful of people dimly aware that Starcraft 2 has some long-delayed expansions in the works.
New news from investment site Seeking Alpha talks about why a sale could be a good thing for Vivendi and a better thing for ATVI. (Always bear in mind that every article on an investment sites exists to get people interested in buying more stock, so trust them as far as you take a man’s word that his wife is beautiful and his children are brilliant.)
Vivendi’s current corporate strategy makes about as much sense as the Maginot Line. Like the ill conceived amalgamation of defense structures established to defend France from German invasion after World War I (but which miserably failed), Vivendi’s existing management team and corporate structure is ill suited to today’s fast paced business world. To their credit, Vivendi’s manager’s have recognized this, which is why Activision could be potentially sold.
Historically, poor decisions made by Vivendi’s managers and bad news associated with Vivendi has significantly hurt Activision share prices. Take for example the Vivendi decision to sell 35 million shares of ATVI stock on November 15, 2011 for $12.20 a piece. ATVI stock had been trading in the $13.00 – $12.80 range prior to that sale. Afterwards, individual ATVI investors saw their investment drop by approximately 5 percent because of Vivendi’s need for a cash infusion.
Then on March 1, 2012, Vivendi reported that it was reducing its outlook for 2013 and Vivendi’s stock price plummeted by over 9 percent. Prior to the news, Activision had been trading at around $12.00 – $11.90. As Vivendi’s stock price dropped, so did ATVI’s, which fell approximately 2 percent to $11.68 on the same day.
For bonus points, remember that the “big four” left Blizzard North (and their ongoing Diablo III project) back in 2003 over a dispute with Vivendi, which was at the time dangling their gaming properties for sale and not sharing any details about the process with the heads of Blizzard North.