Activision Blizzard Boosts Full-Year Guidance -- Update

By Angela Chen 

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Activision Blizzard Inc. on Wednesday raised its full-year guidance as it reported a 15% revenue increase boosted by the rapid growth of its digital segment

The Santa Monica, Calif-based video-game developer now expects full-year sales of $4.43 billion, up from its previous forecast of $4.40 billion, and raised its forecast for per-share earnings to $1.20 from $1.15. Analysts had expected $4.44 billion revenue and $1.18 a share in earnings.

However, it posted a soft outlook for the current quarter. The company sees sales of $650 million and per-share earnings of seven cents; analysts had expected revenue of $688 million and earnings of nine cents a share.

Shares, which have been up about 15% this year through Wednesday's close, slipped 1% in recent after-hours trading.

Activision is the maker of the "Destiny" and "Call of Duty" video games. Like its peers, it once relied on sales of video games stored on discs but has been shifting to digital downloads and customizing game offerings to specific markets.

Digital revenue now comprises 45% of the company's total revenue. In the latest quarter, revenue from digital channels was up 53% to a record $581 million.

Gaming companies spread out revenue for games with online components over the life of the subscription instead of at the time of sale. Accounting for this, digital revenue in the first quarter was $538 million, comprising a record 76% of total revenue.

Game developers like Activision have benefited from the latest generation of videogame consoles, Sony Corp.'s PlayStation 4 and Microsoft Corp.'s Xbox One, both released in 2013. In the latest quarter, revenue from next-generation consoles more than tripled to $434 million, comprising 34% of total console revenue.

Overall, the company posted a profit of $394 million, or 53 cents a share, up from $293 million, or 40 cents a year earlier. Accounting for how revenue is spread out, per-share earnings fell to 16 cents from 19 cents a year earlier.

These earnings would have been flat were it not for the effect of the strong dollar, the company said. Activision does more than 50% of its business overseas. The majority of its international business is in Europe, but it has increasingly expanded in China, the world's largest gaming market. In January, it partnered with China's Tencent Holdings Limited to have its "Call of Duty" franchise enter the country.

Revenue rose to $1.28 billion from $1.11 billion in the prior-year period. Again adjusting for how revenue is spread out, revenue fell to $703 million from $772 million.

Analysts expected earnings of seven cents on revenue of $655 million, according to Thomson Reuters.

On Tuesday, rival Electronic Arts Inc. also reported better-than-expected quarterly earnings on rising digital sales.

Write to Angela Chen at [e-mail]

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