Conclusion:
Negative. The delay is somewhat disappointing, but the more cautious tone surrounding its guidance is the biggest news

• The Street is as at $0.65 for 2010 and may move lower given the cautious tone. The company attributes the caution to the macro environment, but given its three significant game delays, it certainly deserves some of the blame
• We were expecting 1.75M units of Blur, or approximately $80M in sales. Given the amount of capitalized software and the marketing budget associated with the game, it was likely not going to contribute profit this calendar year
• Given the modest contribution of revenue and profit that we expected from Blur, we still believe Activision can hit our estimates for the holiday season. However the hope that it will post meaningful upside and come through the holiday unscathed is a distant memory

However, ATVI is trading at 18x our 2009 EPS estimate, which we believe already prices-in a lot of negative sentiment and limits downside from these levels, especially because we expect investor sentiment to improve as we go into the holiday

Background:
Blur was not setting up to be a hit and its delay is not a total disappointment. The game does not look terrible, but gamers are waiting for Forza (Oct.) and Gran Turismo (Mar.), the two big first-party simulation racing games that come out every few years. Activision said in the release that the delay was for more work on the online multiplayer, but the game could use more time in all facets for it to really stand out.

This is Bizarre’s first game for Activision since its acquisition in September 2007. Not yet releasing a game is a disappointment in relation to the acquisition as well as Activision’s hope to finally break into the racing genre.

Activision has had far more delays this year that usual. It also delayed StarCraft II and Singularity (its other new IP that was slated to launch this year). Historically Activision has delayed fewer games than its peers, a point that it often reminds investors of. It is difficult to tell if these three delays represent an internal change or more delays to come, but against Activision’s strong track record they are a disappointment. While a game can potentially do better when it is delayed, ongoing delays erode investors’ confidence in companies’ ability to hit forecasts.

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