SAN FRANCISCO (Reuters) - 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 November 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 here: r.reuters.com/wyq83q)
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 combined company.
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 December 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 dipped slightly.
Activision shares closed at $11.63 on the Nasdaq.
Reporting by Gabriel Madway; editing by Steve Orlofsky, Andre Grenon and Gunna Dickson
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