Activision Beats Estimates, Sets Buyback, Dividend (Update1)
February 10, 2010, 07:20 PM EST
(Updates shares in fifth paragraph.)
By Adam Satariano
Feb. 10 (Bloomberg) -- Activision Blizzard Inc., the world’s largest video-game maker, reported fourth-quarter results that exceeded analysts’ estimates and said it will buy back $1 billion of its shares and pay its first dividend.
Fourth-quarter profit totaled 49 cents a share excluding some items, Santa Monica, California-based Activision said today in a statement. That topped the 44-cent average estimate of 22 analysts surveyed by Bloomberg. Excluding changes in deferred revenue, sales of $2.5 billion beat estimates of $2.22 billion.
The shares rose on the buyback and 15-cent annual dividend even as the company wrote down the value of “Guitar Hero” and titles for Nintendo Co.’s Wii player. Fewer purchases of such games led to a 9.8 percent drop in industry sales in the U.S. in 2009, researcher NPD Group Inc. said.
“Last year was a really tough year in the category,” Chief Executive Officer Bobby Kotick said in an interview. “The casual consumer in an economy like this one is going to be very cautious about where they spend their dollars. In the music category in particular, where you have a hardware component, those are high price points.”
Activision gained 61 cents to $10.72 in extended trading. The shares added 5 cents to $10.10 at 4 p.m. New York time in Nasdaq Stock Market trading and gained 29 percent last year. The company has $3.3 billion in cash and investments to finance the dividend and share repurchase.
Game Slowdown
For the fourth quarter, Activision reported its net loss widened to $286 million, or 23 cents a share, from a loss of $72 million, or 5 cents, a year earlier. The results included a 19- cent charge to reflect the weakening market for casual and music games, such as “Guitar Hero” and titles for Nintendo’s Wii player, the top-selling game console. The action game “Call of Duty: Modern Warfare 2” set an all-time sales record.
The drop in music and casual games marks a reversal in two growth areas for Activision. “Guitar Hero” has been the leading music game, and Activision was among the early companies to shift resources to games for the Wii as Nintendo’s console gained popularity.
Activision released 25 versions of music games in 2009, and will release fewer than 10 in 2010, publishing chief Mike Griffith said on a conference call with analysts. Sales in the category will continue to fall, he said.
Stores sold 996,000 units of “Guitar Hero 5” through December, down from the 3.4 million units of “Guitar Hero: World Tour” sold in 2008, according to NPD, based in Port Washington, New York.
2010 Forecast
Activision predicted flat profit on falling sales this year, according to the statement, including a first-quarter forecast that fell short of analysts’ predictions.
This quarter, Activision predicts profit of 2 cents a share on sales of $525 million, excluding items such as changes in deferred revenue. Analysts project 8 cents on that basis, the average of 16 estimates compiled by Bloomberg, on sales of $760.6 million.
For the year, Activision predicts profit of 70 cents a share, excluding some items, on adjusted revenue of $4.4 billion. That compares with 69 cents and sales of $4.78 billion for all of 2009.
--Editors: Rob Golum, Anthony Palazzo
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