Shares of Activision Blizzard (NASDAQ:
) initially traded higher on Thursday following a solid earnings
report. Unfortunately for investors, the gains were short lived,
as the stock sold off later on in the session, in line with the
broader market's decline.
Activision reported third quarter earnings per share of $0.15,
significantly higher than the $0.08 that was estimated. Revenue
came in at $751 million -- also an impressive beat of a $709.8
On top of that, Activision projected a strong future, guiding
fourth quarter EPS at $0.70, more than the $0.67 consensus
estimate. The company expects fourth quarter sales to come in at
$2.41 billion, more than the $2.34 billion that was
Activision's performance stands in stark contrast to earnings
reports from other video game developers. THQ (NASDAQ:
), for example, reported losses earlier in the week and said that
the company was exploring alternatives. Electronic Arts (NASDAQ:
) beat expectations when it reported October 30, but gave poor
guidance for the upcoming quarter.
Activision's hopeful guidance for the next quarter was
primarily due to the upcoming release of the next installment in
its Call of Duty franchise, Call of Duty: Black Ops II.
The company also spoke positively about its existing games,
stating that Diablo III -- which came out in May -- continues to
sell well. Activision's popular online, subscription-based RPG
World of Warcraft also did well, due to the launch of a new
expansion. World of Warcraft has been a cash cow for the company
for quite some time, but speculation has risen about the game's
declining subscribers (it was first released in 2004).
But, perhaps most significant, was the strong success of the
company's Skylanders, which Activision said it has generated at
least $500 million from.
Still, there are other areas investors might be concerned
about. Activision admitted that 2013 would be a difficult year
for the video game industry as a whole. There is also the fact
that Call of Duty will be facing a significant challenger this
holiday season -- Microsoft's (NASDAQ:
) Halo 4.
There's also the issue of Vivendi's involvement. The French
company owns over 60 percent of Activision, and it has been
widely speculated for quite some time that Vivendi is looking to
sell its stake.
At any rate, Activision is intriguing for its business model,
which is a bit different from other game developers. Rather than
focusing on just achieving pure sales, most of Activision's big
games carry the potential for a steady stream of revenue. World
of Warcraft is most explicit with its monthly subscription cost,
but the rest of Activision's games also have some component of
this as well: Skylanders encourages players to buy additional
toys; Diablo III has an in-game trading system which Activision
taxes; Call of Duty has an optional subscription plan and players
are encouraged to buy the new version every November.
Is Activision the best video game developer around? Perhaps.
But won't matter if the whole industry is struggling.
Shares of Activision traded at $11 on Thursday, down a little
over 1 percent.
(c) 2012 Benzinga.com. Benzinga does not provide investment
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