Activision reports larger 4th-quarter loss on charges, adjusted results surpass expectations

Wednesday, February 10, 2010

Activision has loss; buyback, dividend help stock

NEW YORK — Shares of Activision Blizzard Inc. shot higher Wednesday after the maker of “Call of Duty” and “World of Warcraft” posted fourth-quarter results above expectations and said it would pay its first dividend.

Investors focused on these bright spots even though the company said it remains cautious about the economy and its 2010 forecast fell below analyst expectations.

“We are in a great position as a company,” said CEO Bobby Kotick.

Shares rose 61 cents, or 6.1 percent, to $10.70 in after-hours trading.

For the last three months of the year, Activision posted a loss of $286 million, or 23 cents per share. This compares with a loss of $72 million, or 5 cents per share, a year earlier.

Revenue fell 5 percent to $1.56 billion.

But the company beat Wall Street’s expectations with its adjusted results, driven by record-breaking sales of “Call of Duty: Modern Warfare 2″ over the holidays. Those results exclude one-time charges and account for deferred revenue on games whose online components reap sales over an extended period.

On this basis, Activision earned $632 million, up 47 percent from a year earlier. Its adjusted profit of 49 cents per share was above the 43 cents that analysts polled by Thomson Reuters were expecting.

Adjusted revenue was $2.5 billion, beating analysts’ expectations for $2.23 billion and up 7 percent from a year earlier.

The company, which is based in Santa Monica, Calif., and majority owned by French conglomerate Vivendi SA, has been able to weather the economic downturn better than many other video game companies, such as Electronic Arts Inc. In addition to strong sales of “Call of Duty,” monthly fees from 11.5 million “World of Warcraft” subscribers helped Activision boost profits.

Kotick said in an interview that loyal players who spend dozens of hours on games, even in a difficult economy, continue to be Activision Blizzard’s “principal market opportunity.”

“It’s that consumer that’s allowed us, for 20 years, to be successful,” Kotick said.

Meanwhile music games like “Guitar Hero” have been less reliable for the company because they are aimed at more casual players, for whom video games are discretionary spending, not a must-have. Activision’s earnings were reduced 19 cents per share in the most recent quarter because of a write-down of the presumed value of its music games and other casual titles.

For 2010, Activision forecast adjusted earnings of 70 cents per share on sales of $4.4 billion. This was below analysts’ expectations of a profit of 73 cents per share on sales of $4.8 billion.

In addition to the new dividend of 15 cents per share annually, the company also said it would buy back up to $1 billion of its stock. It bought back $1.25 billion of its shares between November 2008 and the end of last year.

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