* Q2 earns ex-items top Street, non-GAAP rev misses
* Q3 outlook well below Street, but maintains 2010 outlook
* Shares down 6 percent
(Adds analyst comment, background; updates shares)
By Gabriel Madway
SAN FRANCISCO, Aug 5 Activision Blizzard Inc
(ATVI.O) set a forecast for the current quarter that was below
Wall Street's targets, raising fears about its just-released
title "StarCraft II" and sending shares down 6 percent in
The video game publisher also reported lower-than-expected
revenue for the June quarter, as new titles "Singularity" and
"Blur" failed to excite consumers. The company fell short of
the consensus sales estimate for the first time in the past eight
Analysts said Activision's forecast for the September
quarter reflected weaker-than-expected initial demand for
"StarCraft II," which was released last week.
Investors are hoping "StarCraft" will be a hit on the order
of Activision blockbusters "Call of Duty" and "World of
Warcraft," which have underpinned company profits during an
"I just think that expectations were way too high for
"StarCraft," said Janco Partners analyst Mike Hickey.
For the current quarter, Activision Blizzard forecast an
adjusted profit of 8 cents a share on non-GAAP revenue of $725
million. That was well below the consensus outlook for earnings
of 12 cents a share on revenue of $912 million.
"StarCraft II," a PC strategy game, sold 1.5 million units
in the the first two days after its July 27 release.
But Wedbush Securities analyst Michael Pachter said
investors remain jumpy.
"It's seen as one of the pillars of their growth," he
For its part, Activision said "StarCraft II" is off to a
good start, as the company touted its robust second-half game
"We feel pretty good with where we are, especially with the
strength of our slate is still ahead of us," said Thomas Tippl,
Activision's chief operating and financial officer, in an
Activision is the world's largest stand-alone video game
publisher by market value, and investors have favored its
shares over those of archrival Electronic Arts ERTS.O, which
has struggled through a prolonged turnaround.
Activision reported a net profit of $219 million, or 17 cents
a share, in the second quarter, versus a year-ago net profit of
$195 million, or 15 cents a share.
Excluding items, Activision earned 6 cents a share, beating
the average analyst estimate of 5 cents, according to Thomson
Revenue fell 7 percent to $967 million, while non-GAAP
revenue -- which excludes deferred sales -- came in at $683
million. Wall Street was targeting revenue of $720 million.
Activision said the combination of weaker-than-expected
demand for its new releases and a negative impact from foreign
exchange caused sales to come in below its forecast
"The retail market continues to be difficult," Tippl said,
noting that for the first time digital sales outpaced retail
Activision's shares are up slightly from a year ago,
despite an overall contraction in the $60 billion video game
industry. Game software sales are down 8 percent this year in
the United States, according to industry tracker NPD.
The company maintained its 2010 forecast for earnings,
excluding items, of 72 cents a share on revenue of $4.4 billion.
Wall Street is expecting a profit of 75 cents a share on revenue
of $4.55 billion.
Shares of Activision closed at $11.75 on the Nasdaq, and
fell to $11.00 in extended trading.
(Reporting by Gabriel Madway; Editing by Richard Chang, Matthew
Lewis, Phil Berlowitz)