Bloomberg News

Activision Shares Fall on Drop in ‘Warcraft’ Online Players

November 10, 2011

(Updates with closing stock price.)

Nov. 9 (Bloomberg) -- Activision Blizzard Inc., the largest video-game publisher, fell the most in almost 8 months on a drop in players of its “World of Warcraft.”

Subscriptions to the multiplayer online game dropped to 10.3 million in the third quarter, officials of the Santa Monica, California-based company said yesterday on a conference call. Subscriptions totaled 11.1 million three months earlier.

The number may shrink more because of competition this quarter, Citigroup Inc. analysts Neil Doshi and Mark Mahaney, who recommend buying the stock, said in a note today. Online subscriptions for games such as “World of Warcraft” represent Activision’s largest business, at 44 percent of third-quarter sales. Console products are 37 percent.

Activision fell 6.5 percent to $13.02 at the close in New York, the biggest drop since Feb. 10. The shares have gained 4.7 percent this year.

Activision posted third-quarter profit that beat analysts’ estimates and raised its forecast yesterday. The company’s third-quarter net income almost tripled to $148 million, or 13 cents a share, the Santa Monica, California-based company said yesterday in a statement. Excluding some items, profit of 7 cents exceeded the 2-cent average of 19 analysts’ projections compiled by Bloomberg.

The company, raising its 2011 earnings forecast for the third time this year, released the first-person shooter game “Call of Duty: Modern Warfare 3” yesterday to strong demand.

Biggest Competition

“The preorders were far in excess of what we’ve seen on our products ever,” Chief Executive Office Bobby Kotick said in an interview. “Our biggest competition on ‘Call of Duty’ is ourselves, the games we have out there that people continue to play for hours online.”

Retailers may sell 18 million copies of the $60 “Call of Duty: Modern Warfare 3” by the end of the U.S. holiday season, according to Arvind Bhatia, a Sterne Agee & Leach Inc. analyst in Dallas who recommends the stock.

The eighth “Call of Duty” may sell as many as 6 million copies in 24 hours, said Bhatia. Electronic Arts Inc.’s latest “Battlefield” shooter game went on sale Oct. 25 and sold an estimated 5 million units worldwide in the first week.

Activision’s third-quarter sales, excluding changes in deferred revenue, fell 27 percent to $627 million from $857 million a year earlier. On that basis, analysts predicted $554.1 million, the average of 18 estimates. Total revenue gained 1.2 percent to $754 million, the company said.

Profit Forecast

For the year, profit excluding some items will be 85 cents a share, compared with 77 cents predicted by Activision in August and the 79-cent average estimate of 20 analysts.

Activision is trying to boost sales with the simultaneous release of an online subscription called “Call of Duty Elite.” Users who pay $49.99 annually get new downloads, videos, strategy guides and other features.

This quarter, the company began offering “Skylanders: Spyro’s Adventure,” which combines toy purchases with a video game. Orders have exceeded internal estimates, Kotick said, and are expected to grow after Thanksgiving, on Nov. 24.

--Editors: Donna Alvarado, Niamh Ring

To contact the reporter on this story: Cliff Edwards in San Francisco at cedwards28@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net


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