* 2013 outlook below Wall Street view
* World of Warcraft Q1 subscribers drop about 14 pct
* Stock slips 5 percent in after hours trading
By Malathi Nayak
SAN FRANCISCO, May 8 Activision Blizzard Inc
warned investors on Wednesday that it expects a
challenging second-half and holiday quarter because of heavy
competition and uncertainty around the launch of new video game
The shares of the largest U.S. video games publisher were
down about 5 percent at $14.45 in after-hours trading from its
$15.26 close on the Nasdaq.
Subscribers to "World of Warcraft," a large source of steady
subscription-based revenue, dropped sharply by about 14 percent
to 8.3 million last quarter from 9.6 million in the previous
quarter, the company said.
Activision executives told analysts they expect Warcraft
subscriber figures to dip further in coming months as the
fantasy-action game continues to lose users to similar,
"No one understands what 'numbers to go lower' means and
that's got investors concerned," said Michael Pachter, an
analyst at Wedbush Securities. "Activision's going to have to
To arrest the loss of subscribers, the company will invest
significantly in the franchise and deliver new content to engage
players, Chief Executive Officer Bobby Kotick said in an
The company, known for its "Call of Duty" and "Skylanders"
games, slightly raised its 2013 revenue and earnings forecast to
$4.25 billion and 82 cents per share, compared with $4.18
billion and 80 cents provided at the end of the last quarter
ended Jan. 30.
Its 2013 outlook was below the view of Wall Street analysts,
who expected the company to forecast revenue of $4.27 billion
and earnings at 85 cents per share.
In contrast, rival Electronic Arts Inc on Tuesday
forecast fiscal 2014 earnings above Wall Street's expectations,
triggering a 17 percent rally in its shares on Wednesday.
WHITHER THE XBOX?
The video game industry is grappling with flagging sales as
players migrate from to buying packaged games for consoles to
free or less-expensive offerings on mobile devices.
Moreover, consumers have held back from buying hardware and
software as they await new versions of Sony Corp's
PlayStation and Microsoft Corp's Xbox, which are
expected later this year.
Nintendo Co Ltd's new Wii U console, which was
launched in November, has disappointed investors with its
lackluster sales, casting doubt on the industry's hope that new
consoles could boost prospects.
This year, Activision will clash with a number of
mega-franchises during the coming holidays, a crucial period
that often accounts for the bulk of the industry's annual
Its top releases include shooter game "Call of Duty:
Ghosts", which will compete with EA's "Battlefield 4" over the
holidays. Its "Skylanders SWAP Force", a children's
fantasy-adventure game sold with actual toys that come to life
onscreen, will battle Disney's "Infinity", based on a similar
concept, and is slated for release in August.
"Infinity is going to be supported by a large marketing
budget so obviously, it's something that's formidable," Pachter
To try and get a leg up on the competition, Kotick told
analysts that Activision will "further increase our sales and
marketing investments," without offering specifics.
Activision's warnings about the competition overshadowed
strong first-quarter earnings.
The Santa Monica-based company said non-GAAP revenue,
adjusted for the deferral of digital revenue and other items,
rose to $804 million, surpassing Wall Street's average revenue
forecast for $704.6 million and up 37 percent from $587 million
in the same quarter a year ago.
Non-GAAP income totaled $199 million, or 17 cents per share,
in the fourth quarter, compared with $67 million, or 6 cents per
share a year earlier. This beat Wall Street's average earnings
estimate of 11 cents per share, according to Thomson Reuters