Activision full-year forecasts miss, to cut nearly 800 jobs

(Reuters) - Activision Blizzard Inc forecast full-year profit and revenue below analysts’ estimates on Tuesday and said would invest more in developing its game franchises as the company faces intense competition from games such as “Fortnite”.

FILE PHOTO: Attendees walk past a "Call of Duty" advertisement at the E3 2017 Electronic Entertainment Expo in Los Angeles, California, U.S. June 13, 2017. REUTERS/ Mike Blake

However, the company’s profit beat estimates by a cent and the game publisher announced a new share buyback program of up to $1.5 billion, while saying it would cut about 800 jobs to focus on developing its games franchises, sending its shares up 3 percent in after-market trading.

The company had 9,800 employees as of the end of 2017.

As part of the 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, Activision said the number of developers working on its games, such as “Call of Duty”, “Candy Crush” and “Overwatch”, in aggregate will increase about 20 percent over the course of 2019.

“ATVI’s refocus on key game franchises over a net headcount reduction is the right path on returning to growth,” Benchmark Co analyst Mike Hickey said.

Activision’s results follow weak reports from rival publishers 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, 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.

“2019 will be a transition year for us,” Chief Financial Officer Dennis Durkin said.

“Given limited frontline releases, the organizational work underway and the current competitive environment, we’re planning for this year to be down year-over-year,” Durkin added.

EA and Take-Two plunged last week as their forecasts came in short of analysts’ estimates.

Activision’s full-year outlook for adjusted profit of $2.1 per share and revenue of $6.30 billion came in below Wall Street estimates. Analysts were expecting a profit of $2.54 per share and revenue of $7.25 billion, according to IBES data from Refinitiv.

The company said it will not generate material revenue from the “Destiny” game franchise in 2019 following the sale of publishing rights to Bungie in January.

For the fourth quarter, Activision reported total adjusted revenue of $2.84 billion, missing estimates of $3.04 billion.

Excluding items, the company earned $1.29 per share, just ahead of estimates of $1.28 per share.

Reporting by Arjun Panchadar in Bengaluru; Editing by Shounak Dasgupta