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Vivendi-Activision Deal Blends Strengths

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Colin Sebastian, an analyst at Lazard Capital Markets, called the deal a "very good fit" because the two companies complement each other.

Key is the addition of "World of Warcraft" to the Activision family. Launched in 2004, the persistent online fantasy world has mushroomed to 9.3 million subscribers worldwide, each paying up to $15 per month to battle mythical monsters for treasure and other rewards.

Calling the new company Activision Blizzard instead of Activision Vivendi is a clear acknowledgment of the importance "Warcraft" brings to the mix, Green said.

Thill said Activision would be less tied to the unpredictable highs and lows of console games. Now, each time a new wave of consoles hits the market, game publishers are forced to decide which system will come out on top, without even knowing which one consumers will ultimately snap up the most.

Although Thill predicted about 25 percent of the new company's revenue would come from Warcraft subscription fees, he said the deal isn't foolproof, either.

He questioned how much longer the three-year-old "Warcraft" _ aging by video game standards _ can remain a phenomenon that has become a pop culture hit with an episode of "South Park" and a recent Toyota truck commercial, for example.

Cole said the games business has seen previous waves of consolidation _ the latest one in the mid-1990s _ that haven't panned out for media companies.

"Historically when a company like Time Warner or Viacom says they plan to invest $1 billion in the video game market, investors should expect that they are planning a way to lose $1 billion," he wrote in a recent research report.

Activision Chief Executive Bobby Kotick would stay on as president and CEO of the new company, which would continue to operate as a public company traded on the Nasdaq Stock Market under the ticker ATVI.

Vivendi shares gained 1 percent to close at $46.42 in trading Monday in Paris. Activision shares rose $2.82, or nearly 13 percent, to $24.97 in mid-afternoon trading in New York, while Electronic Arts shares fell $1.06, or 1.9 percent, to $55.13.


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