February 12, 2019 / 9:15 PM / 7 months ago

Activision Blizzard's 1st-qtr profit forecast misses estimates

Feb 12 (Reuters) - Activision Blizzard Inc reported weaker-than-expected fourth-quarter revenue and forecast current-quarter revenue and profit below analysts’ estimates on Tuesday, as it faces competition from “Fortnite” and invests more in developing its games.

The company said it would invest more in its biggest franchises and cut jobs as it restructures certain businesses which are not meeting expectations.

As part of these restructuring actions, Activision expects to incur a pre-tax charge of about $150 million, the majority of which is expected to be incurred this year.

However, the company said the number of developers working on games like “Call of Duty”, “Candy Crush”, “Overwatch”, “Warcraft”, “Hearthstone” and “Diablo” in aggregate will increase about 20 percent over the course of 2019.

Activision forecast current-quarter adjusted revenue of $1.18 billion and profit of 20 cents per share, missing analysts’ average estimates of $1.45 billion and 46 cents per share, according to IBES data from Refinitiv.

The company’s full-year outlook for adjusted profit of $2.1 per share and revenue of $6.30 billion also came in below Wall Street estimates. Analysts were expecting a profit of $2.54 per share and revenue of $7.25 billion.

Activision also said it expects limited upfront game releases in certain business segments.

For the reported quarter, Santa Monica, California-based Activision reported total adjusted revenue of $2.84 billion. Analysts on average had expected revenue of $3.04 billion.

Excluding items, the company earned $1.29 per share.

Activision’s results follow weak reports from other rival publishers such as Take-Two Interactive Software Inc and Electronic Arts Inc, adding to fears that competition from free-to-play battle royale games “Fortnite” and “PUBG” was eating into sales.

The battle royale format in multi-player gaming, which allows dozens of players to battle each other until the last survivor, became wildly popular in 2018 and the two games have been credited with introducing newer audiences to gaming.

EA and Take-Two both plunged last week as their forecasts came in short of Wall Street estimates.

Activision reported a net income of $650 million, or 84 cents per share in the fourth quarter ended Dec. 31, compared to a loss of $584 million, or 77 cents per share, a year earlier when it recorded a charge related to U.S. tax laws. (Reporting by Arjun Panchadar in Bengaluru; Editing by Shounak Dasgupta)

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