Activision shares rally, publisher backs 2009 profit view

SAN FRANCISCO (Reuters) - Activision Blizzard Inc's (ATVI.O) shares surged nearly 8 percent on Thursday after the game publisher reaffirmed its 2009 profit forecast, despite a difficult economy that has sapped consumer spending.

Although Activision cut its annual revenue forecast as it postpones the release of two major games, analysts said the company's second-half slate of game titles is still quite formidable.

The company bumped the release dates for "Singularity" and "StarCraft II" into next year and slashed its 2009 non-GAAP revenue forecast by $300 million, but still affirmed its annual forecast for adjusted profit of 63 cents a share.

Analysts said the company continues to expand its operating margin and with the scheduled release of "Call of Duty: Modern Warfare 2" in November, its holiday lineup looks strong.

UBS analyst Brian Pitz said "Call of Duty" could sell 11.5 million to 12.5 million units by the end of the year.

"Activision's title line-up is the envy of the industry over the next 12 months," Pitz wrote in research note.

The video game industry as a whole continues to struggle with poor sales of both software and consoles. Activision now expects North American and European retail software markets to be flat to down slightly this year due to slower hardware sales and a weak macroeconomic environment.

But the "Guitar Hero" publisher has fared better than its competitors, who have been shedding jobs in an effort to stay profitable in the downturn.

Lazard analyst Colin Sebastian upped his price target on Activision to $15 from $14 and in a note called the company a "diamond in the rough."

Besides "Call of Duty," analysts said upcoming releases such as "DJ Hero" and the latest "Tony Hawk" offering gives the company a strong slate in the crucial holiday season.

The shares of Santa Monica, California-based Activision rose 89 cents to $12.44 in midday trading on the Nasdaq.

(Reporting by Gabriel Madway; editing by Andre Grenon)