pressure. While Microsoft Corporation (NASDAQ:MSFT) must continually update its software offerings, it at least knows what the software will be: The next version of Windows will be an operating system. Sure, it will have to add new features and make it more tablet-friendly but at least Microsoft Corporation (NASDAQ:MSFT) knows what it needs to make. In contrast, Activision needs constantly to come up new, innovative games. Sure, they can milk franchises like Warcraft or Call of Duty for awhile, but all good things must come to an end (see: the Duke Nukem franchise).
Indeed, numerous video game publishers and studios have gone bankrupt (the latest is THQ) or out of business when they were not able to produce financially successful follow-ups to hit titles or the public’s taste in gaming changed. I believe that the video game industry parallels the movie industry. Small movie studios face great financial risk from a high-budget “blockbuster” movie that fails. These box office flops could, and often did, put a studio in financial peril. So studios consolidated under large corporations that had the balance sheets to withstand several dud pictures per season, providing the financial ability for owners and investors to withstand strings of poor box office performers. Likewise, the video game industry faces similar sets of risks.
In any case, since Vivendi SA (EPA:VIV) owns 61 percent of Activision Blizzard, then the value ascribed to Vivendi’s stake in Activision right now should be 61 percent of the value of Activision right now. The value can, and will, no doubt, change in the future. But for now, Vivendi’s stake is worth EUR 7.2B.
Maroc Telecom (“Maroc”)
MAROC TELECOM (EPA:IAM) is the main telecommunications company in Morocco. The company was privatized in 2001, and Vivendi now owns 53 percent of it. Like ATVI, Maroc is also publicly traded, in this case on both the Euronext Paris exchange and the Casablanca Stock Exchange, which makes estimating the value of the company easier. As of the end of February “the market” valued Maroc Telecom at approximately EUR 8.3B, making Vivendi’s 53 percent stake worth EUR 4.4B.
Strategy Going Forward
Vivendi’s previous CEO of 10 years, Jean Bernard Levy, announced his decision to depart in June of 2012. Levy and current Vivendi chairman, Jean-Rene Fourtou, had disagreed about the company’s strategy with Levy preferring to keep the company together and Fourtou wanting to sell or spin off some of Vivendi’s assets. We believe Fourtou’s strategy will be much more beneficial to shareholders, as Levy’s empire building has led to a high debt burden, the waste of shareholders’ money on deals like the purchase of the remaining 44 percent of SFR from Vodafone Group Plc (NASDAQ:VOD) (LON:VOD), and a stock price at almost a decade low.
As assets begin to be sold off and debt reduced, the value of Vivendi’s stock should begin to rise. In the meantime, stockholders are getting paid an attractive dividend yield to wait. Although the company currently pays a dividend of EUR 1.0 per share (down from EUR 1.4 per share), the dividend may decline further if Vivendi holds off on assets sales.
How Much Is This French Mess Worth?
