Wednesday, video game publisher Activision Blizzard, Inc. (ATVI), reported a better than expected second quarter profit, driven by Activision Publishing's Prototype, Transformers: Revenge of the Fallen, X-Men Origins: Wolverine and the Guitar Hero and Call of Duty franchises, as well as Blizzard Entertainment's World of Warcraft. Revising its forecast for the full year, Activision cut its revenue outlook, raised GAAP earnings outlook and reaffirmed adjusted earnings. For the third quarter, the Activision expects revenues and earnings to come in below Street estimates.
Santa Monica, California-based Activision Blizzard posted second quarter GAAP net income of $195 million or $0.15 per share, and non-GAAP net income of $112 million or $0.08 per share, both better than the company's prior GAAP and non-GAAP earnings outlook of $0.10 per share and $0.06 per share respectively.
Net income for the year ago quarter was $28 million or $0.05 per share, and non-GAAP net income was $81 million or $0.14 per share.
On average, 26 analysts polled by Thomson Reuters expected the company to earn $0.07 per share for the quarter. Analysts' estimates typically exclude special items.
Results for the quarter are not directly comparable with the year ago period, as the year earlier net income does not reflect the results of the combined company. On July 9, 2008, the business combination between Activision, Inc. and Vivendi Games, Inc. was consummated, and Activision, Inc. was renamed Activision Blizzard, Inc.
Activision Blizzard's GAAP net revenue for the quarter was $1,038 billion, and its non-GAAP net revenue was $801 million. The company's prior GAAP net revenue outlook for the quarter was $1 billion.
On a non-GAAP basis, the company's net revenue outlook was $775 million. Twenty-three Wall Street analysts expected revenues of $801.25 million for the quarter. In the prior-year quarter, the company reported revenues of $0.352 billion.
Robert Kotick, chief executive of Activision Blizzard, said, "Our second quarter overperformance was driven by Activision Publishing's PROTOTYPE, Transformers: Revenge of the Fallen, X-Men Origins: Wolverine and the Guitar Hero and Call of Duty franchises, as well as Blizzard Entertainment's World of Warcraft."
During the quarter, Activision Blizzard increased its North American and European market share 2.8 points across all platforms to 12.7% from 9.9% for the previous year. Product sales fetched $747 million for the quarter, while subscription, licensing and other revenues amounted to $291 million.
Massively multi-player online role playing game or MMORPG generated revenues of $324 million or 31% of total quarterly revenues, while Microsoft Xbox 360 contributed $231 million. Sony PlayStation-3 generated revenues of $152 million and Sony PlayStation-4 indicated revenues of $44 million. Nintendo Wii recorded revenues of $118 million.
North America accounted for $557 million in revenues or 54% of total revenues, while Europe recorded $408 million, with Asia Pacific bringing in $73 million in revenues.
For the first half, the company's net income was $384 million or $0.28 per share. In the year-ago period, net income was $71 million or $0.12 per share. Total net revenues for the first half were $2.019 billion.
Looking ahead, Kotick continued, "This fall, we will release our strongest video game slate based on some of the industry's most successful franchises, including Infinity Ward's Call of Duty: Modern Warfare 2, Guitar Hero 5, DJ Hero, Band Hero, Tony Hawk: RIDE and Bakugan Battle Brawlers"
However, the company has postponed the expected release dates for two games, Singularity and StarCraft II to 2010.
As a result of moving the anticipated releases of these games and lower market expectations, Activision Blizzard adjusted its fiscal year 2009 outlook for GAAP net revenues from $4.3 billion to $4.05 billion, and its outlook for non-GAAP net revenues from $4.8 billion to $4.5 billion.
The company, however, raised its GAAP earnings outlook to $0.26 per share from $0.24 per share, and re-affirmed its non-GAAP earnings outlook of $0.63 per share. Analysts currently estimate earnings of $0.66 per share on revenues of $4.87 billion for the year.
For the third quarter of calendar year 2009, Activision Blizzard expects GAAP net revenues of $680 million, and GAAP loss of $0.03 per share. On a non-GAAP basis, the company expects net revenues of $700 million and $0.03 per share for the third quarter. Wall Street anticipates earnings of $0.10 per share on revenues of $909.49 million.
ATVI closed Wednesday's trading at $11.55, down $0.28 or 2.37%, on a volume of about 20.96 million shares. In after hours, the stock further lost $0.15 or 1.30% and traded at $11.40. In the 52-week period, the stock moved between $8.14 - $18.18, on a 3-month average of $12.52 million shares.
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