Activision Blizzard Losses Widen, Still Beats Expectations

World of Warcraft and Call of Duty publisher Activision Blizzard posted lower sales and a wider loss for the quarter ended December 31, 2009, but still managed to beat expectations. While Activision had a major hit with its internally-developed Call of Duty: Modern Warfare 2 from November 2009, softness in the casual and music game genres were partly to blame for a quarterly net loss that widened to $286 million from a $72 million loss a year prior, on a GAAP basis. Quarterly revenue on a GAAP basis reached $1.56 billion, a year-on-year decline of 5 percent. On a non-GAAP basis, revenues were $2.50 billion for the quarter. For the calendar year 2009, the company reported GAAP revenues of $4.28 billion; non-GAAP revenues were $4.78 billion. Activision Blizzard's GAAP earnings per share were 9 cents for the year. Activision CEO Bobby Kotick said in a statement, "We delivered better-than-expected calendar year non-GAAP financial results and our fourth quarter non-GAAP net revenues and non-GAAP earnings per share were the highest in company's history." "On a non-GAAP basis, our performance enabled us to deliver the most profitable year in our company's history and record operating margin. We generated approximately $1.2 billion in operating cash flow and ended the year with approximately $3.3 billion in cash and investments." He added that Modern Warfare 2 was the top-selling title overall and DJ Hero was the "highest grossing new IP launched in 2009." World of Warcraft remained tops in the subscription-based MMORPG category on a worldwide basis, he said, citing internal estimates and the NPD Group. Kotick also said that StarCraft II, Blizzard's highly-anticipated PC real-time strategy game, along with World of Warcraft: Cataclysm, would be major drivers of Activision Blizzard's business in calendar 2010, confirming a planned release date for the titles later this year. For calendar year 2010, Activision Blizzard expects GAAP revenues of $4.2 billion, and GAAP earnings per share of 47 cents. On a non-GAAP basis, the company expects revenues of $4.4 billion and non-GAAP earnings per share of 70 cents for the calendar year. The projected revenue declines for the fiscal year are in part "due to changes in our music business" and "fewer sales of higher-priced, lower-margin peripherals," said CFO Thomas Tippl in a conference call. But the company expects the music business to improve long-term, thanks to reorganization and a "higher-margin software mix," Tippl added. High margin PC sales will also drive revenues in the year ahead. For the first quarter 2010, Activision Blizzard expects GAAP net revenues of $1.1 billion, with GAAP earnings per share of 20 cents. On a non-GAAP basis, the company said it expects net revenues of $525 million and 2 cents earnings per share for the March quarter.