Activision Profit Outlook Misses Street Forecast

Video game publisher Activision Blizzard forecast 2009 earnings to fall far short of Wall Street expectations, sending its shares down over 5 percent Wednesday.

The outlook overshadowed Activision's better-than-expected quarterly earnings, which were driven by strong sales of its ''Guitar Hero'' and "Call of Duty'' franchises.

Activision forecast profit excluding items at 61 cents a share for 2009, on revenue of $4.7 billion. It said the revenue forecast includes a negative impact of $400 million from a stronger dollar and a reduction of $200 million from its lower margin distribution and co-publishing businesses.

The average analyst estimate was for full-year earnings of 67 cents a share on revenue of $5.17 billion, according to Reuters Estimates.

Shares of Activision which closed Wednesday at $9.48, fell over 5 percent in extended hours trading.

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Even as the company's competitors cut jobs and set plans to release fewer titles, Chief Executive Robert Kotick said Activision is pursuing a disciplined strategy that won't include "wholesale layoffs'' in 2009.

"We won't be distracted by layoffs and restructuring and things that other companies are going to be distracted with,'' Kotick told Reuters in an interview.

"We don't respond to managing our operating expenses because there's a financial crisis, we do it all the time," he said.

Activision reported a net loss in its fourth quarter of $72 million, or 5 cents a share.

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Excluding items, it posted a profit of 31 cents a share, beating the average analyst estimate of 29 cents a share, according to Reuters Estimates. The company was formed through the merger of Activision with Blizzard, the games unit of France's Vivendi. The deal closed last July.

Adjusted revenue in the quarter was $2.3 billion—above its previous forecast—and topped the $2.15 billion Wall Street estimate.

Activision's "Guitar Hero World Tour'' and "Call of Duty: World at War'' games were the No. 1 and No. 2 console games, respectively, in North America and Europe in the fourth quarter, according to NPD. In addition, its "World of Warcraft'' was the top-selling PC game in those regions 2008.

Earlier this month, Activision rival Electronic Arts posted weaker-than-expected results and forecast a loss for the current fiscal year, while smaller competitor THQ swung to a loss and announced spending and job cuts. Take Two Interactive Software will report next month.

Activision's first-quarter forecasts also missed Wall Street expectations. The company estimated earnings excluding items of 3 cents per share, against the average analyst forecast for a profit of 11 cents per share.

Activision's shares are down more than 40 percent over the past 6 months, although the company's stock has fared much better than its rivals. EA's stock is down more than 60 percent.

Overall video game sales seem to be holding up relatively well in a difficult economy. According to the latest research from NPD, combined video game software unit sales across the world's three largest games markets—the United States, the United Kingdom and Japan—grew 11 percent in 2008.

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