Activision Blizzard Tops Analysts in Q3, Misses with Q4 Guidance

Andrew Klips  |

Activision Blizzard Inc. (ATVI) , the maker of the wildly popular video game franchise Call of Duty, saw profits and sales dive in the third quarter as gamers held off for new consoles to hit the markets and online players unsubscribed, but the figures were still strong enough to be analyst expectations for the quarter.  However, full year guidance was lighter than expected.


The gaming community is awaiting the launch of the Sony (SNE) PlayStation 4 on November 15 and the Microsoft (MSFT) Xbox One, which is slated for debut on November 22.  Activision Blizzard chief executive Bobby Kotick said in a statement today that new titles in two of their most popular franchises, Call of Duty: Ghosts and Skylanders SWAP Force, will be available for the new consoles.


For the quarter ended September 30, Activision reported revenue of $691 million, down from $841 million in the third quarter last year, but above guidance of $635 million that was provided on August 1.  Net earnings were $56 million, or 5 cents per share, versus $226 million, or 20 cents per share, in the year prior quarter.  Excluding one-time items, adjusted earnings were $90 million, or 8 cents per share, compared to $168 million, or 15 cents per share, in last year’s quarter.


Wall Street was expecting adjusted earnings of 3 cents per share on revenue of $589.4 million.


Non-GAAP net revenue from digital channels was $399 million, representing 61 percent of total sales.


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During the quarter, Activision completed a transaction in which it bought back $5.8 billion worth of its stock (roughly 430 million shares) from parent company Vivendi.  In a separate deal, an investment group headed by CEO Kotick and Activision co-chairman Brian Kelly purchased 172 million shares from Vivendi for $2.34 billion.  Vivendi was left with a minority position of about 12 percent of the company.


Although sales were lower, the company had plenty to brag about.  World of Warcraft held its title as the most popular subscription-based MMORPG (Massively Multiplayer Online Role-Playing Game) in the world, with about 7.6 million subscribers, down from 7.7 million subscribers in the previous quarter.  StarCraft II: Heart of the Swarm was the #1 PC game in North America through the first three quarters of the year.  Skylanders Giants was Europe and North America’s top-selling kids console and hand-held game in dollar sales in the first nine months of 2013.  Skylanders Giants and Call of Duty: Black Ops II were both in the top five best-selling games in North America and Europe.


In a separate statement, Activision said that it has sold more than $1 billion of Call of Duty: Ghosts into retail store worldwide as of day one.  Since its release on Tuesday, the game has taken the number one spot as the most played game on Xbox Live, according to Microsoft.


Kotick still took a cautious tone for the current quarter, saying, “…we continue to believe that the fourth quarter this year presents a unique and challenging landscape due to increased competition and uncertainties surrounding the console transition. We are confident in our ability to navigate these challenges successfully, particularly in light of the recent completion of our transaction with Vivendi and the focus and flexibility provided by our return to independence.”


For the fourth quarter, Activision sees adjusted earnings of 72 cents per share on revenue of $2.2 billion.  This was lower than prior guidance of profits in the range of 76 cents to 79 cents per share on revenue of $2.25 billion.  Analysts were predicting earnings of 87 cents on revenue of $2.29 billion for the fourth quarter.


Shares of ATVI close Wednesday trading flat at $16.53 and are down in early extended trading by 1.4 percent at $16.30.  So far in 2013, shares are up by about 57 percent.

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