Activision Blizzard Inc. (ATVI:US), the largest U.S. video-game maker, fell the most in almost nine months after losing more than 1 million “World of Warcraft” players and issuing a forecast that disappointed some investors.
Activision, based in Santa Monica, California, dropped (ATVI:US) 5.4 percent to $11.14 at the close in New York, the biggest decline since Nov. 9. The stock has lost 9.7 percent this year.
The “World of Warcraft” multiplayer online game, one of its top titles, lost 1.1 million users in the second quarter to finish at 9.1 million, Santa Monica, California-based Activision said yesterday in a statement (ATVI:US). The company cited the pending release of a new version, called “Mists of Pandaria,” and competition from its “Diablo” title.
“The decline in ‘WoW’ subscribers spooked investors,” Michael Pachter, an analyst at Wedbush Securities in Los Angeles, said in an e-mail. The game had weathered competition from Electronic Arts Inc. (EA:US) in the first quarter, said Pachter, who has an outperform rating on the shares, the equivalent of a buy. “Everyone thought they would be stable. The decline was a surprise.”
Second-quarter profit, excluding items, totaled 20 cents a share, double the company’s May forecast of 10 cents and beating the 12-cent average of 19 analysts’ estimates (ATVI:US). Activision yesterday raised its full-year earnings projection to 99 cents from 95 cents previously.
“We think being prudent is the best path, and I think that’s what we’ve done with our guidance,” Chief Financial Officer Dennis Durkin said on a conference call with investors.
Activision, led by Chief Executive Officer Bobby Kotick since 1992, is 61 percent owned by Paris-based Vivendi SA (VIV), also parent of Universal Music. The French company is under pressure from investors to boost its share price and Chairman Jean-Rene Fourtou on July 12 said ‘it’s a possibility’’ his company may sell Activision.
The Financial Times reported yesterday that Vivendi hasn’t attracted interest in the game unit, citing people it didn’t identify.
Second-quarter sales (ATVI:US), excluding changes in deferred revenue, rose 51 percent to $1.05 billion and beat the $837 million average of 19 analysts’ estimates compiled by Bloomberg. Total revenue fell 6.2 percent to $1.08 billion.
Net income fell 45 percent to $185 million, or 16 cents a share, from $335 million, or 29 cents, a year earlier.
Activision has weathered an industry slowdown in sales of packaged discs for games played on consoles by releasing additional content online for its shooter franchise “Call of Duty.” It’s also nurturing a new title called “Skylanders Spyro’s Adventure,” making both video games and action figures.
With the new “World of Warcraft” scheduled for release on Sept. 25, the next “Skylanders” installment and a new “Call of Duty” going on sale later this year, Activision projected full-year sales, excluding changes in deferred revenue, to rise 3.1 percent to $4.63 billion. Analysts had estimated (ATVI:US) $4.59 billion.
For the third quarter, Activision forecasts $690 million in revenue and profit of 7 cents a share, on that basis, compared with analysts’ projections of a 12-cent profit and sales of $730.9 million.
In the past two years, the company has exceeded estimates for profit in every quarter and for sales in all but one, Bloomberg-compiled data show.
In the first half of 2012, “Skylanders” toys were the top-selling action figures in the U.S., while the video games ranked among the top three titles, Kotick said in the statement.
In July, Activision announced a multiyear partnership with Tencent Holdings Ltd. (700), an Internet services provider, to deliver a Chinese version of “Call of Duty” that is free to play and sells in-game items.
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