* Revenue beats Street
* Staunches Warcraft subscriber-bleed
* Shares flat after rising as much as 1.6 pct
By Malathi Nayak and Liana B. Baker
SAN FRANCISCO, May 9 Activision Blizzard Inc
raised its earnings outlook on Wednesday and showed
investors it was able to bring an end to the exodus of
subscribers from its largest Internet game, "World of Warcraft,"
that had hurt the company in recent quarters.
Investors closely watch subscriber numbers for "World of
Warcraft" because the franchise is the company's most profitable
business and generates a steady stream of recurring revenue from
millions of users who pay $15 a month to play it.
The game, which is 7 years old, has seen its subscriber
numbers steadily decline in recent quarters. Activision managed
to keep its first quarter "World of Warcraft" subscribers static
at 10.2 million compared with last quarter. But it lost
subscribers compared with a year ago, when it had 11.4 million
"Maintaining our subscribers level puts us in a great
position," said Mike Morhaime, the chief executive of the
company's Blizzard unit on the conference call.
The next expansion pack of the game, called "Mists of
Pandaria," is being tested now by fans and should generate
renewed interest in the franchise in coming quarters, he said.
National Alliance Capital Markets Mike Hickey said he was
reassured on Wednesday that the company can hold its Warcraft
subscribers steady and has successfully fended off its biggest
rival, Electronic Arts, which came out with an Internet
game of its own in December based on the Star Wars movies.
"To have a stable subscriber base given the nature of the
markets that we're in and the competitive threats is a real
testament to the strength of the franchise," Hickey said.
On Monday, EA said it lost 400,000 subscribers of "Star
Wars: The Old Republic" in the fourth quarter, dealing a blow to
its efforts to rely on the new game for growth and sending the
game maker's shares down as much as 10 percent.
BY THE NUMBERS
Activision Blizzard cut 600 jobs in February. Activision,
which employed 7,300 people at the end of 2011, acquired its
Blizzard unit from Vivendi in 2008.
The company said that game development schedules will not be
affected by the job cuts and it was on track to launch its
upcoming game, "Diablo III," on May 15.
Heading into the holiday season, the company's 2012 pipeline
includes Call of Duty: Black Ops II, which is scheduled for a
November 13 launch and a free, microtransaction version of Call
of Duty for players in China.
Activision Blizzard's "Call of Duty: Modern Warfare 3" was
its biggest holiday title last year and saw record sales of over
400 million on its first day. The company said the Call of Duty
franchise had about 40 million monthly active users as of March
The game maker now expects annual earnings per share of 95
cents on revenue of $4.53 billion, which is below Wall Street's
expectations of 97 cents per share on revenue of $4.57 billion.
For the second quarter, it expects EPS of 10 cents per share on
revenue of $805 million, which misses analyst estimates of 16
cents per share on revenue of $822.16 million.
The company posted total revenue of $1.17 billion compared
with $1.5 billion a year ago for the three months ended March
31. Its net income dropped to $384 million, or 33 cents per
share, compared with $503 million, or 42 cents per share a year
Adjusted for the deferral of digital revenue and other
items, the company said net income fell 57 percent to $67
million, or 6 cents per share. Wall Street analysts were
expecting 4 cents per share on average, according to Thomson
The company's shares were flat after rising as much as 1.6
percent in the after-hours trading session.