A little bit of nice timing here coming off my post yesterday. Anyways I have been hearing these rumors for a month or so now and am just waiting for their meeting on June 22nd to see what they have decided or not decided to do.
Activision Blizzard (ATVI) description- Worlds biggest video game company, and in my opinion has the best overall portfolio of games in the entire industry. Call of Duty, Skylanders, Diablo, Starcraft, World of Warcraft, among others are included in the portfolio. This is the asset that I think would make the most sense to sell or spin off.
Call of Duty produces over $1 billion of revenues by itself with every game they produce, which comes out once a year usually in November.
However most of these franchises have either just come out with games or are past their prime in my opinion. World of Warcraft while still a cash cow is gushing subscription members every month, and Blizzard has already started to move resources into their next MMORPG which has no release date. Diablo III just came out so won’t expect another game in that series for a while. Call of Duty while still producing huge revenues and profits is at its peak to me and can only go down from here. The development studio who makes the Call of Duty series has been fighting with and losing a lot of team members over the last several years which will also hurt quality in the future.
I also see the entire console video game industry in a decline as well. You can only keep asking people to pay more for less, for so long before they decide to stop buying games and consoles, especially with cheaper games coming out either free to play or for under $10 on tablets and phones.
The next generation of gaming systems is going to start coming out later in 2012 which is also another reason they should sell before that happens due to the higher costs and lower profitability that comes from every new console generation.
In my opinion now would be the perfect time to sell ATVI, will likely never be able to get a higher price than they would now due to the above. The only problem would be finding someone big enough to buy them.
GVT description-Fixed phone and internet Brazilian telecom who Vivendi recently bought. Has great growth potential but will cost a lot in the short term due to high amounts of cap ex in the telecom industry. Should be one of the better Vivendi holdings over the long term though as their margins are good. My main concern with this one is that Vivendi over payed for it so it will take longer to recoup that investment, and being in Brazil you never know what company might be expropriated by the goverments in South America.
Maroc Telecom description-Mobile/internet/fixed phone company with most of their business in Morocco. Same problem with cap ex as GVT above especially since they are going to be transitioning into 3G coverage from 2G, also could eventually pay off due to more data plan subscriptions from the smartphones that run 3G. Maroc has also been having problems with the government in Morocco as they have been having to cut rates thus losing out on revenues and lowering margins.
Canal+ description- Pay TV/cinema company with operations mainly in France. Another asset I could see them spinning off or selling. Owns 80% of Canal+ France which they have been trying to buy out completely to no avail which could lead them to sell their portion of it. Does own the rights to show Ligue 1 soccer matches and UEFA Champions League matches in France which is a major advantage.
Universal Music Group description-Biggest owner of music and music publishing rights in the world. Produces the lowest EBITDA and CFFO margin of the entire group. Also doesn’t seem to fit the profile of the rest of the subsidiaries which might lead this to being sold. However owns the rights to music from the likes of: Rihanna, Lady Gaga, Justin Bieber, Eminem, Taylor Swift and various other major music artists. The music industry could also see a comeback to higher profitability with things like ITunes, Pandora, and Spotify though if they can figure out how to monetize their publishing rights properly.
SFR description- Mobile/fixed phone/internet company with operations mostly in France. Vivendi’s biggest revenue generator currently and probably most important to the groups success in the future. Currently facing some headwinds in France with having to cut rates which is lowering margins. They are facing new, tougher, and cheaper competition in their market which is also currently lowering margins and causing a loss of subscribers. Also losing some business due to the difficulties of the European economy and the loss of discretionary income by some individuals. Recently bought out the remaining 44% of SFR from Vodafone which in my opinion they overpaid for, but should pay off in the future. Will hopefully return to profitability in the near future.