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Activision Blizzard executives to leave company amid harassment lawsuit

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Yahoo Finance’s Dan Howley weighs in on Activision Blizzard’s latest financial results and breaks down why Blizzard’s Entertainment President is leaving the company.

Video Transcript

MYLES UDLAND: All right. Activision Blizzard shares are in focus today, company up-- seeing its shares, rather, up about 2%, after the company last night reported its latest earnings report. But of course, the backdrop to this earnings report, ongoing harassment allegations by former employees, and the company talked at length about that issue within its ranks on its earnings call. Yahoo Finance Tech Editor Dan Howley joins us now to talk us through everything going on with Activision Blizzard here. So Howley, let's start with the numbers. And I think important to note here on the back of Take-Two with a bit of a disappointment earlier this week, a little bit more constructive for the game industry.

DAN HOWLEY: Yeah. Take-Two just kind of bombed their earnings, especially with the forecast for the coming quarter. Activision Blizzard, on the other hand, did great. They beat expectations, $1.92 billion for the quarter versus $1.89 billion that was expected, $0.91 per share versus $0.75 per share for this quarter. In the coming quarter, they're outpacing analysts' expectations. They're looking at the $1.85 billion versus analysts' expectations of $1.79 billion for the quarter. Earnings per share a little lower than what analysts were expecting for the coming quarter.

And, yeah, their stock price went through the roof. But really, you know, this is overshadowed, as you alluded to, by this ongoing harassment and discrimination kind of issue that they're dealing with. They're being sued by the state of California because of that. Now there's a shareholder lawsuit against them, claiming that the company didn't inform them of the investigations that were going on into this.

The day they announced their earnings, yesterday, the president of Blizzard actually stepped down. That's J. Allen Brack. And then later in the day, the head of PR for the company stepped down. J. Allen Brack is going to be replaced by two people now who would be the co-leads of Blizzard. Blizzard, of course, is the arm of Activision Blizzard that makes games like "Diablo," "World of Warcraft." Activision is where you get your "Call of Duties," things like that.

They, though, continue to do well, as far as mobile goes. King, their mobile brand, continues to do well. "Call of Duty's" basically just printing money for them now, though there are some complaints among gamers about hackers in there. That could sour them over time. We don't know. But for now, it continues to do well. And the Blizzard brand is still chugging along. So the fundamentals are there for the company.

But the response to-- the initial response, at least, to the initial suit from the company was, as CEO Bobby Kotick said, tone deaf. They basically dismissed it out of hand and said that this is something from years ago. Clearly that's not the case with these people now stepping down.

There was the employee walkout, where we saw employees walk out physically and virtually on their jobs. Obviously not everyone is back into the office. So they were doing it virtually as well. Employees were coming forward with their own stories of harassment. So this is going to be something that I think overhangs the company for some time.

And it is kind of an issue that the gaming industry in general needs to deal with. Obviously we'd heard Riot Games. It was an issue there. Ubisoft, another huge publisher, was an issue there. They saw five executives step down. So it seems like it's time for these companies to finally clear the house of these executives or these employees that aren't, you know, behaving properly.

MYLES UDLAND: Yeah. Jen Oneal and Mike Ybarra now stepping in to be the co-leads over at Blizzard.

And Howley, just to kind of circle back-- because, again, there's-- there's two tracks to this story. But you know, I'm struck on the earnings call. You know, [INAUDIBLE] over at Morgan Stanley, the first question was about the headlines around corporate culture. It is very infrequent that you see Wall Street analysts asking about news stories and not asking about the minutiae of margin guidance.

And one wonders how long the road ahead is, I think, for Activision management, Activision Blizzard management-- let's be clear, the combined company-- to-- to kind of put this issue behind them. Or it's really not going to move behind them, right? This is something that I think this management team is now going-- it's going to define their time with the company.

DAN HOWLEY: Yeah, I think it's important. Because when you look at these kinds of companies, these games are made by the developers, right? These are the people that they want to attract. And if the corporate culture there is so toxic that it pushes them away or it makes people think twice about joining the ranks of these companies, then that will ultimately hurt their bottom line.

So, you know, you're right. You get on these earnings call, and it really is just kind of the dull, you know, let's go over the numbers kind of thing. Nobody asks the-- the really interesting questions. But to hear questions about the-- the management shows that investors recognize how much of an issue that can be for companies like this. And that's why they're really going to have to really kind of tamp down on it.

MYLES UDLAND: All right. Yahoo Finance's Dan Howley with the latest going on over at Activision Blizzard.