Activision Blizzard, Inc. Bids $5.9 Billion to Be the King of Interactive Gaming

By Tim

Activision Blizzard has acquired King Digital and its portfolio of social games for $5.9 billion. Credit: King Digital.

Shares of Activision Blizzard rallied throughout the day Tuesday after announcing plans to buy social and mobile game maker King Digital for $5.9 billion in cash and debt.

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Investors seem to like that King could be be 30% accretive to Activision Blizzard's fiscal 2016 revenue and earnings, after adjusting for non-cash items and stock-based compensation, among other charges.

Combined, the two companies have generated $6.8 billion in non-GAAP revenues over the trailing 12 months. Here's a closer look at how Activision Blizzard alone performed in the third quarter:

Metric Q3 2015 Actuals Q3 2014 Actuals YOY Growth
Non-GAAP revenue $1,040 million $1,170 million (11.1%)
Non-GAAP income from operations $251 million $260 million (3.5%)
Adjusted EPS $0.21 $0.23 (8.7%)

Sources: S&P Capital IQand Activision Blizzard press release.

Commenting on the results, CEO Bobby Kotick said in a press release:

What went right:Digital channels continue to be a source for strength for the business. Revenue from subscriptions, downloadable content, and the like amounted to a record $697 million after adjusting for certain charges and currency effects. That's equal to 67% of total revenue and up 38% year over year.

What went wrong:Except for slow growth in the core business -- common for times when there isn't a major new franchise to celebrate or a console refresh to cash in on -- Activision Blizzard had a strong quarter with progress in meaningful areas. For example,Destiny, which the company distributes for developers, wooed players in September with the record-breaking downloadable expansion, The Taken King.

What's next:WithCandy Crush Saga and similar games in its portfolio, mobile and social are going to become significant areas of focus for Activision Blizzard. As of this writing, more than 474 million play King's games on smart devices and onFacebook. Look for Activision to seek ways to bring Call of Duty and its other big-name franchises to these mobile and social players.

Financailly, Activision Blizzard expects $2,148 million in non-GAAP revenue and $0.82 a share of profit on the same basis in Q4. For the full year, Kotick and his team are aiming for $4,650 million and $1.31 a share, respectively. Activision Blizzard earned $1.32 a share in non-GAAP earnings in 2014. With King, Kotick is expecting a reversal.

"The combined revenues and profits solidify our position as the largest, most profitable standalone company in interactive entertainment. With a combined global network of more than half a billion monthly active users, our potential to reach audiences around the world on the device of their choosing enables us to deliver great games to even bigger audiences than ever before," Kotick said in a press release announcing the King deal.

The article Activision Blizzard, Inc. Bids $5.9 Billion to Be the King of Interactive Gaming originally appeared on

Tim Beyers crushed it at the Halloween candy bowl. He's also a member of theMotley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission but didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim'sweb homeandportfolio holdingsor connect with him onGoogle+,Tumblr, or Twitter, where he goes by@milehighfool.The Motley Fool owns shares of and recommends Activision Blizzard and Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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