Market Spotlight: Video Games

The combined company, Activision Blizzard, will continue to be traded under the symbol "ATVI." But together with Vivendi's Blizzard, which publishes "World of Warcraft," the world's most popular online game, Activision is poised not only to beef up its product line but also expand its reach into Asia, a market largely untapped by most U.S. game companies.

As a combined company, Activision Blizzard will be able to better compete with EA, which is also flexing its muscle in the region. EA recently bought Hands-On Mobile Korea, a South Korean mobile game developer and publisher, for an undisclosed sum, saying it will help expand its mobile business in Asia.

Wedbush Morgan analyst Michael Pachter recently upgraded Activision ahead of the merger, which he expects to close by July 11 following the company's July 8 shareholder meeting.

He noted that Activision's current share price is above the price of the transaction, but he expects the deal to be approved nonetheless, since both Activision and Vivendi Games "have performed better than was originally contemplated by the merger agreement."

But the outcome of a much larger deal for EA is less clear. The company has offered $2 billion for Take-Two Interactive Software Inc., the publisher of the popular "Grand Theft Auto" series. EA wants to buy Take-Two not just for the GTA franchise, by far the company's most lucrative, but also for its sports business and critically acclaimed titles such as "BioShock."

But EA has not raised its offer price since the deal first became public in February; in fact it was lowered by 26 cents in April to reflect restricted stock granted to Take-Two management. And Take-Two continues to reject it as too low.

"It's not a done deal," said Janco Partners analyst Mike Hickey in an interview.

He noted that Take-Two's shares are currently trading below EA's offer price, signaling that investors may be preparing for EA to walk away.

EA has repeatedly called its per-share-offer for Take-Two "full and fair," and noted that the company's shares were trading far below the offer price before Feb. 25 when it was made public. Take-Two's stock closed at $17.36 on Feb. 22, the last trading day before the offer became public. It has since traded roughly between $24 and just under $28.