Activision Blizzard Inc.
) recently settled its long-standing legal dispute with its
employees, Jason West and Vince Zampella. It was an out-of-court
settlement and the terms were kept confidential. This comes as no
surprise, given the settlement of the legal dispute regarding
contract interference claims between Activision and
Electronic Arts Inc.
) roughly two weeks ago.
Neither the terms of settlement nor the monetary outflow from
Activision's coffers were disclosed. However, the company stated
that the one-time payment related to this settlement would not
impact its GAAP and non-GAAP earnings outlook for the current
quarter or the fiscal year.
For the current quarter the company expects to earn GAAP
earnings per share of 13 cents and Non-GAAP earnings of 10 cents
per share. For fiscal year 2012, Activision expects to earn GAAP
and non- GAAP earnings of 65 cents and 95 cents, respectively.
Previously, Jason West and Vince Zampella headed the Infinity
Ward division at Activision and were fired in March 2010. West and
Zampella filed a $36 million lawsuit against Activision alleging
that they were terminated so that the company could avoid making
royalty payments on
Call of Duty: Modern Warfare 2
, the top-selling game in 2010.
West and Zampella also accused Activision of making false
promises, including complete freedom in running the Infinity Ward,
when it was reluctant to renew their contracts. In retaliation,
Activision countersued both of them for breach of contact and
alleged that the two developers had hired agents and secretly met
and negotiated with EA executives while still working at Activision
Notably, in March this year, a California Superior Court Judge
dismissed a fraudulent-inducement claim by West and Zampella
against Activsion, but agreed to conduct a full hearing on the
claim for promissory fraud.
Interestingly, Activision in a regulatory filing revealed that
its claim damages would amount to $1 billion, a sharp increase
versus the original claim of $36 million.
Activision expects a robust quarter with a blockbuster release
. Moreover, games like
are expected to lend support to its top line this quarter.
Additionally, Activision is focused on building a number of
franchises that will drive its top and bottom lines in 2012 and
beyond. The company's foray into the mobile gaming market is
expected to be a long-term positive.
However, the softness in the video game industry and
Activision's limited presence in the social gaming market coupled
with significant competition from EA and
Take-Two Interactive Software Inc.
) keep us Neutral on the stock over the long term.
Currently, Activision Blizzard has a Zacks #3 Rank, which
implies a Hold rating in the short term.
ACTIVISION BLZD (ATVI): Free Stock Analysis
ELECTR ARTS INC (EA): Free Stock Analysis
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