Stanford Blyth Fund - Activision Blizzard BUY Pitch

ACTIVISION BLIZZARD DISCOUNTED CASH FLOW MODEL

MULTIPLE-SCENARIO ANALYSIS TOGGLE

Current Price $10.87Product Sales Growth 10.00%Subscription & Licensing Growth 10.00%Terminal Growth Rate 5.00%Risk-Free Rate 4.22%Rm-Rf 6.00%

Projected Price $13.87

Effective Tax Rate -43% * Terminal & Rm-Rf are very sensitive to changesForward Effective Tax Rate 35% *Received income tax benefit as result of net loss

*Assumed 35% tax rate from 2010 forward

* Terminal & Rm-Rf are very sensitive to changes*Received income tax benefit as result of net loss*Assumed 35% tax rate from 2010 forward

Page 74OPERATING ASSUMPTIONS

Historical Projected2006 2007 2008 2009 2010

REVENUE ITEMSProduct Sales $421 $457 $1,872 $2,059 $2,265

Growth 8.55% 309.63% 10.00% 10.00%Subscription & Licensing 597 892 1,154 1,269 1,396

Growth 49.41% 29.37% 10.00% 10.00%Total Revenue 1,018 1,349 3,026 3,329 3,661

COGS ITEMSProduct Costs 153 171 1,160 789 868

% Sales 15.03% 12.68% 38.33% 38.33% 38.33%Software Royalties 71 52 267 182 200

% Sales 6.97% 3.85% 8.82% 8.82% 8.82%Intellectual Property Licenses 24 9 219 149 164

% Sales 2.36% 0.67% 7.24% 7.24% 7.24%COGS MMORPG 119 204 193 131 144

% Sales 11.69% 15.12% 6.38% 6.38% 6.38%Total COGS 367 436 1,839 1,251 1,377

Gross Profit 651 913 1,187 2,077 2,285 Margin 63.95% 67.68% 39.23% 62.40% 62.40%

SG&A ItemsProduct Development 246 397 592 $651 $716

% Sales 24.17% 29.43% 19.56% 19.56% 19.56%Sales & Marketing 147 172 464 $510 $561

% Sales 14.44% 12.75% 15.33% 15.33% 15.33%Restructuring Costs 4 (1) 93 $102 $113

% Sales 0.39% -0.07% 3.07% 3.07% 3.07%General & Administrative 133 166 271 $298 $328

% Sales 13.06% 12.31% 8.96% 8.96% 8.96%Total SG&A 530 734 1,420 1,562 1,718

Operating Profit (EBIT) 121 179 (233) 515 567 Margin 11.89% 13.27% -7.70% 15.48% 15.48%

Depreciation & Amortization 39 63 385 424 466 Margin 3.83% 4.67% 12.72% 12.72% 12.72%

EBITDA 160 242 152 939 1,033 Margin 15.72% 17.94% 5.02% 28.20% 28.20%Growth 51.25% -37.19% 517.54% 10.00%

Capital Expenditures (96) (68) (46) (31) (34)% Sales 9.43% 5.04% 1.52% 1.52% 1.52%

Projected Note: Links to Cover Page in Purple2011 2012 2013

$2,492 $2,741 $3,015 10.00% 10.00% 10.00% 1,536 1,690 1,859

10.00% 10.00% 10.00% 4,028 4,430 4,873

955 1,051 1,156 38.33% 38.33% 38.33%

220 242 266 8.82% 8.82% 8.82%

180 198 218 7.24% 7.24% 7.24%

159 175 192 6.38% 6.38% 6.38% 1,514 1,666 1,832

2,513 2,765 3,041 62.40% 62.40% 62.40%

$788 $867 $953 19.56% 19.56% 19.56%

$618 $679 $747 15.33% 15.33% 15.33%

$124 $136 $150 3.07% 3.07% 3.07% $361 $397 $436 8.96% 8.96% 8.96% 1,890 2,079 2,287

623 686 754 15.48% 15.48% 15.48%

512 564 620 12.72% 12.72% 12.72%

1,136 1,249 1,374 28.20% 28.20% 28.20%10.00% 10.00% 10.00%

(38) (42) (46)1.52% 1.52% 1.52%

Page 72WORKING CAPITAL ASSUMPTIONSCash Impact of Working Capital

Historical2007 2008

Working Capital AssetsAccounts Receivable 112 1,210 Inventories 21 262 Software Development & Intellectual Prop Licenses 25 235

% Sales 2% 8%Other Working Capital Assets 23 201

% Sales 1.70% 6.64%

Working Capital LiabilitiesDeferred Revenues 197 923

% COGS 45.18% 50.19%Accounts Payable 49 555

% COGS 11.24% 30.18%Accrued Expenses & Other Liabilities 282 842

% COGS 64.68% 45.79% RatiosDays Receivable (AR / (Total Sales/365) ) 30.30 145.95 Inventory Turns (Total COGS / Inventory) 20.76 7.02

Working CapitalWorking Capital (347) (412)Change in Working Capital (65)"Less" Change in Working Capital 65

Projected2009 2010 2011 2012 2013

804 884 972 1,070 1,177 127 139 153 169 185 259 284 313 344 378

8% 8% 8% 8% 8% 221 243 267 294 324

6.64% 6.64% 6.64% 6.64% 6.64%

628 691 760 836 920 50.19% 50.19% 50.19% 50.19% 50.19%

378 415 457 503 553 30.18% 30.18% 30.18% 30.18% 30.18%

573 630 693 763 839 45.79% 45.79% 45.79% 45.79% 45.79%

88.13 88.13 88.13 88.13 88.13 13.89 13.89 13.89 13.89 13.89

(169) (186) (204) (225) (247) 243 (17) (19) (20) (22)

(243) 17 19 20 22

VALUATION - DISCOUNTED CASH FLOW METHOD

Historical2006 2007 2008

Free Cash Flow Calculation

EBITDA 160 242 152 Less: Taxes on EBITDA 69 104 65 Less: Capex (96) (68) (46)Add: Working Capital Impact - 65 (243)

Unlevered Free Cash Flow $343 $(72)

Discounted Cash Flow

DCF Enterprise Value Calculation

Terminal Value CalculationTerminal Growth Rate 5.00%Terminal Enterprise Value 20,431.07 Discounted Terminal Value 14,917.75

Enterprise Value 18,128.93 Enterprise Value Net Debt 18,128.93 Share Price $13.87

Discount Rate (WACC) 8.18% *Company has not utilized debt financing p58Current Price 10.87Shares Outstanding 1,307 Equity (Market Cap) 14,207 Debt + Equity 14,207 Cost of Equity 8.18%Equity/Value 100.00%Cost of Debt 7.08%Debt 0Debt/Value 0.00%Tax Rate -43%

Cost of Equity (CAPM) 8.18%Risk-Free Rate 4.22%Beta 0.66Rm-Rf 6.00%

Projected Terminal2009 2010 2011 2012 2013

0 1 2 3 4 5

939 1,033 1,136 1,249 1,374 404 444 (398) (437) (481) (31) (34) (38) (42) (46) 17 19 20 22 -

$1,328 $1,461 $721 $793 $847

$1,328 $1,350 $616 $626 $619 $650

*Company has not utilized debt financing p58