Activision Blizzard (ATVI)

In addition to acquiring or creating high profile intellectual property, we have also continued our focus on establishing and maintaining relationships with talented and experienced software development teams.  We have strengthened our internal development capabilities through the acquisition of several development companies with talented and experienced teams including, most recently, the acquisitions of Vicarious Visions Inc. in January 2005, Toys For Bob, Inc. in April 2005, and Beenox, Inc. in May 2005.  We have development agreements with other top-level, third-party developers such as id Software.

We are utilizing these developer relationships, new intellectual property acquisitions, new original intellectual property creations, and our existing library of intellectual property to further focus our game development on product lines that will deliver significant, lasting, and recurring revenues and operating profits.

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Net revenues from sales of titles for hand-held platforms for the six months ended September 30, 2005 increased 65% from the prior fiscal year, from $42.1 million to $69.6 million.  The increase is mainly due to the worldwide introductions of the NDS and PSP hand-held platforms.  Although the number of titles released year over year remained relatively consistent, we were able to sell these titles over three hand-held platforms compared to just one in the first half of fiscal 2005.  In addition, titles for the PSP have a higher retail pricing point of $49.99 which compares to no titles released at the $49.99 pricing point in the first half of fiscal 2005.

With the worldwide introduction of the NDS and PSP hand-held platforms and the expected corresponding increase in the number of titles across gaming platforms released year over year, we expect that revenues from hand-helds will continue to increase versus fiscal 2005.