(Repeats to add graphic link after paragraph 8)
* Q3 adj EPS, non-GAAP rev above Street view
* Conservative Q4 forecast below Street view
* New "Call of Duty" seen performing below last release
* Shares flat
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By Gabriel Madway
SAN FRANCISCO, Nov 4 Activision Blizzard Inc
(ATVI.O) reported better-than-expected quarterly earnings,
boosted by strong sales of "StarCraft II" and cost containment,
and the video game publisher's typically conservative forecast
for the holiday quarter failed to spook investors.
Activision shares were flat in after-hours trading after
initially rising nearly 2 percent.
Expectations are high for the company's December quarter,
when Activision is set to launch two of the biggest games of
the year: the newest "Call of Duty" title and an update of its
multiplayer online game, "World of Warcraft: Cataclysm."
Janco Partners analyst Mike Hickey said the company posted
"phenomenal numbers" for the September quarter and noted Wall
Street has become accustomed to its cautious guidance.
"Management is trying to err on the side of conservatism,
but we expect some upside to the guidance," he said.
Although Activision was bullish about the prospects for
"Call of Duty: Black Ops," which is set for release on Nov. 9,
the company said it does not expect it to outperform last
year's "Call of Duty: Modern Warfare 2."
That game set a record with first-day sales of 4.7 million
copies, and has sold more than 20 million units worldwide.
For the current quarter, Activision forecast adjusted
earnings of 47 cents a share on non-GAAP revenue of $2.2
billion. That compares with analysts' expectation for a profit
of 50 cents a share on revenue of $2.31 billion.
(For a graphic on video game industry forecasts, click
Activision Blizzard is the world's largest stand-alone game
publisher. It was formed in 2008 through the merger of
Activision with Blizzard, the former games unit of France's
Vivendi SA (VIV.PA), which still owns more than half the
Like other game makers, Activision is aiming to ramp up
digital sales, which carry a much higher margin than
traditional packaged games.
The online game "World of Warcraft," produced by the
company's Blizzard wing, is key to that plan. With more than 12
million subscribers, the game provides the company with healthy
and profitable recurring revenue.
"World of Warcraft: Cataclysm," the game's latest
supplement, will be released Dec. 7.
Although the Activision and Blizzard segments of the
company generate roughly the same amount of revenue, Blizzard
is highly profitable, while Activision operates at a loss.
Shares of Activision are up nearly 5 percent this year,
much better than chief rival Electronic Arts Inc ERTS.O, but
lagging the performance of the S&P 500 index.
Activision reported third-quarter net earnings of $51
million, or 4 cents a share, up from $15 million, or 1 cent a
share, in the year-ago period.
Excluding items, Activision earned 12 cents a share, higher
than the 9 cents a share expected by analysts on average,
according to Thomson Reuters I/B/E/S.
Revenue came in at $745 million, while non-GAAP revenue
rose 14 percent to $857 million, above Wall Street's estimates
of $750 million.
Sales in the quarter were helped by the release of PC
strategy game "StarCraft II: Wings of Liberty," which sold more
than 3 million units in its first month.
Even as overall sales increased, total costs and expenses
Activision shares closed at $11.63 on the Nasdaq.
(Reporting by Gabriel Madway; editing by Steve Orlofsky,
Andre Grenon and Gunna Dickson)