Games keep Vivendi Q3 in play

Canal Plus also gains, but music group revenue lags

French media and telecommunications giant Vivendi SA reported virtually un-changed third-quarter revenue Tuesday as solid results at Vivendi Games and Canal Plus Group helped offset a dip at Universal Music Group and mixed telecom revenue trends.

The company posted a 0.3% year-over-year rise in its third-quarter revenue to €4.9 billion ($6.3 billion), slightly below Wall Street's average expectation. As it generally does under French disclosure rules, Vivendi will report bottom-line figures later.

UMG's revenue dropped 2.1% to €1.1 billion ($1.4 billion) because of unfavorable exchange rates that counteracted the success of new releases from the Killers, Fergie, Scissor Sisters and Ludacris. Digital-music sales, however, were up 88% compared with a year ago, boasting strong growth in online and mobile formats and accounting for 11.5% of total revenue.

Canal Plus Group, Vivendi's pay TV unit, saw a 4.6% increase in its third-quarter revenue thanks to an increase in digital subscriptions in addition to locking up the rights to broadcast France's top soccer matches and Europe's Champions League.

Vivendi Games' revenue gain of 15.2% compared with last year was attributed to the continued international success of "World of Warcraft" in addition to the North American launch of "Scarface." Revenue at the division amounted to €182 million ($232.9 million).

Vivendi's SFR telecom unit struggled with disappointing sales, as revenue at France's second-largest mobile phone company decreased 1.8%. The company blamed the drop on its cut of wholesale tariffs at the start of the year.

Vivendi during the weekend confirmed a recent takeover approach by private-equity firm Kohlberg Kravis Roberts & Co., but emphasized that talks about a potential deal have ended (HR 11/6).

Merrill Lynch analyst Julien Roch on Tuesday downgraded shares of Vivendi from "buy" to "neutral," citing a 13% stock run-up since Sept. 1. "While we still like the company fundamentals, we feel (7% upside to our price target) is not enough to warrant putting fresh money into the stock," the analyst said. "However, we think holders of the stock should keep their shares."

Georg Szalai in New York contributed to this report.
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