Sunday, February 6, 2011

Activision Blizzard Inc. (NASDAQ: ATVI): Q4 Earnings Preview 2010

Activision Blizzard Inc. (NASDAQ: ATVI) is scheduled to release fourth-quarter earnings after the closing bell on Wednesday, February 9, 2011. Analysts, on average, expect the company to report earnings of 51 cents a share on revenue of $2.35 billion. In the year ago quarter, the company reported earnings of 49 cents per share on revenue of $2.50 billion.

Activision Blizzard, Inc., through its subsidiaries, publishes online, personal computer, console, and hand-held games worldwide. The company develops and publishes video games, as well as maintains its proprietary online-game related service, It also publishes interactive software products and peripherals internationally. The company's products cover various game categories, including action/adventure, action sports, racing, role-playing, simulation, first-person action, music, and strategy. Its products include Guitar Hero, Call of Duty, Tony Hawk, Spider-Man, X-Men, James Bond, and Transformers, as well as Diablo, StarCraft, Warcraft, and World of Warcraft.

In the preceding third quarter, the Santa Monica, California-based company's net income was $51 million, or 4 cents a share, compared to $15 million, or 1 cent per share, in the prior-year quarter. Revenue grew 6% to $745 million from $703 million. On an adjusted basis, the company earned 12 cents a share on revenue of $857 million. Analysts, on average, expected the company to report earnings of 9 cents per share on revenue of $750.00 million.

At its last earnings call in November, the company said that it expects fourth-quarter GAAP net revenues of $1.26 billion, and a GAAP loss per share of 1 cent. On a non-GAAP basis, the company expects net revenues of $2.2 billion and 47 cents earnings per diluted share for the fourth quarter.

For the calendar year, Activision expects a record non-GAAP operating margin of 29%. For fiscal year 2011, Activision expects to benefit from the growing installed base of consoles and increased online sales, especially for the core game of platforms.

Activision also expects to release the hero brand, Spider-Man, X-Men, Transformers, and True Crime: Hong Kong in fiscal 2011.

The video game industry is undergoing a significant transition, with increasing contribution from digital downloads, used game sales, game rentals, subscriptions, social network games and mobile game apps as compared to retail sales. The consumer demand for video game is likely to increase with the gradual improvement in the overall U.S. economy for 2011. The sector has seen an increasing amount of its casual gamers shift towards gaming on smartphones or Facebook applications recently.

The company released six new titles in the fourth quarter of 2010, which include Call of Duty: Black Ops, World of Warcraft: Cataclysm, Guitar Hero: Warriors of Rock, D J Hero, Tony Hawk: SHRED, Spider-man: Shattered Dimensions, GoldenEye 007 and Bakugan.

Early in November, the company released Call of Duty: Black Ops, gritty military-themed shooter game that is the seventh installment of the popular "Call of Duty" franchise. The company sold about 5.6 million copies of "Call of Duty: Black Ops" for $360 million on its first day, setting a new record for the video game industry.

In December, the company released World of Warcraft: Cataclysm, the third expansion of the popular massively multiplayer online role-playing game World of Warcraft that was originally released in late 2004. Activision Blizzard sold 3.3 million copies of Cataclysm in its first 24 hours of release.

Going forward, Activision has one of the strongest product pipelines. This includes Blizzard Entertainment’s two expansion packs to StarCraft II, the highly-anticipated next generation of the Diablo series, and Blizzard's yet to be announced MMO title.

Full Disclosure: None.
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