Activision, Associated Press
NEW YORK — Activision Blizzard Inc. reported strong results for the latest quarter and raised its outlook for the full year on Tuesday as it began selling its latest "Call of Duty" game ahead of the holidays.
Long lines formed outside retail stores to buy "Call of Duty: Modern Warfare 3," which went on sale at midnight Monday. The game is expected to break industry records set by its predecessor a year ago for metrics such as first-day sales and overall dollar sales. Last year's "Call of Duty: Black Ops" sold more than 25 million copies.
Investors, though, seemed to focus on Activision's other big game, "World of Warcraft," as the company's stock fell after the results came out. That's because the game ended the quarter with 10.3 million active subscribers, down from 11.1 million from the previous quarter.
Wedbush analyst Michael Pachter said the 7 percent drop "freaked people out."
Activision gets much of its revenue and profit from "Call of Duty" and "World of Warcraft," Pachter said, so "if either is threatened, it makes people wonder about future profit growth."
The company hasn't given day-one sales figures for "Call of Duty: Modern Warfare 3," though it said pre-launch orders shattered prior records. The game's predecessor earned more than $1 billion in sales.
Blockbuster disc sales aside, Activision is also focusing on the game's long-term future — its online components that let people download add-on chapters, challenge other players online and keep playing long after the game's initial story ends.
On Tuesday, the company officially launched "Call of Duty: Elite," an online service for the game that's part social network and part organized sports with competitions, stats and a slew of other offerings.
CEO Bobby Kotick said the company is trying to deliver game content more regularly — like TV. This gets players treating games as a service they return to week after week, month after month, rather than a box they buy around Christmas and play for a few hours until they are done.
Activision earned $148 million, or 13 cents per share, in the July-September period. That's up from $51 million, or 4 cents per share, a year earlier.
Revenue rose 1 percent to $754 million from $745 million.
Adjusted earnings were $87 million, or 7 cents per share, in the latest quarter — above the 2 cents per share that analysts polled by FactSet were expecting. Adjusted revenue was $627 million, above analysts' expectations of $565 million.
These figures exclude special items and account for the effects of deferring revenue and the related cost of sales for games with online components. Like other video game companies, Activision spreads these out over time, while the game is played, rather than all at once.
Activision is forecasting fourth-quarter adjusted earnings of 55 cents per share on revenue of $2.17 billion. Analysts had expected earnings of 53 cents per share on revenue of $2.11 billion on that basis.
The fourth quarter is usually the most important one for video game companies because it includes holiday sales. Activision, which is based in Santa Monica, Calif., tends to give conservative guidance. Besides "Call of Duty," the company said its kids' game, "Skylanders: Spyro's Adventure," which launched in October, is also doing well.
For the full year, the company now expects adjusted earnings of 85 cents per share on revenue of $4.25 billion. Its prior forecast was for adjusted earnings of 77 cents per share on revenue of $4.05 billion.
On this basis, analysts had predicted earnings of 79 cents per share on revenue of $4.12 billion.
The company's stock fell 45 cents, or 3.2 percent, to $13.48 in extended trading after the results came out. Earlier, the stock closed up 19 cents, or 1.4 percent, at $13.93. The stock also hit a 52-week high of $14.40 earlier on Tuesday.
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