Activision Blizzard Inc warned investors on Wednesday that it expects a challenging second-half and holiday quarter because of heavy competition and uncertainty around the launch of new video game consoles.<\/p>\n
The shares of the largest U.S. video games publisher were down about 5 percent at $14.45 in after-hours trading from its $15.26 close on the Nasdaq.<\/p>\n
Subscribers to “World of Warcraft,” a large source of steady subscription-based revenue, dropped sharply by about 14 percent to 8.3 million last quarter from 9.6 million in the previous quarter, the company said.<\/p>\n
Activision executives told analysts they expect Warcraft subscriber figures to dip further in coming months as the fantasy-action game continues to lose users to similar, free-to-play games.<\/p>\n
“No one understands what ‘numbers to go lower’ means and that’s got investors concerned,” said Michael Pachter, an analyst at Wedbush Securities. “Activision’s going to have to stabilize that.”<\/p>\n
To arrest the loss of subscribers, the company will invest significantly in the franchise and deliver new content to engage players, Chief Executive Officer Bobby Kotick said in an interview.<\/p>\n
The company, known for its “Call of Duty” and “Skylanders” games, slightly raised its 2013 revenue and earnings forecast to $4.25 billion and 82 cents per share, compared with $4.18 billion and 80 cents provided at the end of the last quarter ended January 30.<\/p>\n
Its 2013 outlook was below the view of Wall Street analysts, who expected the company to forecast revenue of $4.27 billion and earnings at 85 cents per share.<\/p>\n
In contrast, rival Electronic Arts Inc on Tuesday forecast fiscal 2014 earnings above Wall Street’s expectations, triggering a 17 percent rally in its shares on Wednesday.<\/p>\n
The video game industry is grappling with flagging sales as players migrate from to buying packaged games for consoles to free or less-expensive offerings on mobile devices.<\/p>\n
Moreover, consumers have held back from buying hardware and software as they await new versions of Sony Corp’s PlayStation and Microsoft Corp’s Xbox, which are expected later this year.<\/p>\n
Nintendo Co Ltd’s new Wii U console, which was launched in November, has disappointed investors with its lackluster sales, casting doubt on the industry’s hope that new consoles could boost prospects.<\/p>\n
This year, Activision will clash with a number of mega-franchises during the coming holidays, a crucial period that often accounts for the bulk of the industry’s annual revenue.<\/p>\n
Its top releases include shooter game “Call of Duty: Ghosts”, which will compete with EA’s “Battlefield 4” over the holidays. Its “Skylanders SWAP Force”, a children’s fantasy-adventure game sold with actual toys that come to life onscreen, will battle Disney’s “Infinity”, based on a similar concept, and is slated for release in August.<\/p>\n
“Infinity is going to be supported by a large marketing budget so obviously, it’s something that’s formidable,” Pachter said.<\/p>\n
To try and get a leg up on the competition, Kotick told analysts that Activision will “further increase our sales and marketing investments,” without offering specifics.<\/p>\n
Activision’s warnings about the competition overshadowed strong first-quarter earnings.<\/p>\n
The Santa Monica-based company said non-GAAP revenue, adjusted for the deferral of digital revenue and other items, rose to $804 million, surpassing Wall Street’s average revenue forecast for $704.6 million and up 37 percent from $587 million in the same quarter a year ago.<\/p>\n
Non-GAAP income totaled $199 million, or 17 cents per share, in the fourth quarter, compared with $67 million, or 6 cents per share a year earlier. This beat Wall Street’s average earnings estimate of 11 cents per share, according to Thomson Reuters I\/B\/E\/S.<\/p>\n
Activision\u2019s Kotick among top US earners<\/a><\/strong><\/p>\n Electronic Arts chief quits<\/a><\/strong><\/p>\n