Activision beats earnings expectations

Activision beats earnings expectations
Seth Tipps

By Seth Tipps

May 9th 2013 at 8:04AM

Publishing giant cautious over uncertainties surrounding next generation hardware

The Q1 2013 earnings report for Activision-Blizzard beat expectations and raised year-end guidance to $4.22 billion.

Net revenues for the period climbed 13 per cent year-on-year to $1.32bn: 14 per cent higher than expected. Income was up as well from $384m to $456m from last year.

Even so, Activision CEO Bobby Kotick raised a flag of concern that sales during this christmas season might be more in the hands of console manufacturers and increased competition.

"While we have had a solid start to the year, we now believe that the risks and uncertainties in the back half of 2013 are more challenging than our earlier view, especially in the holiday quarter," said CEO Bobby Kotick

"The shift in release dates of competing products, the disappointing launch of the Wii U, uncertainties regarding next generation hardware, and subscriber declines in our World of Warcraft business all raise concerns, as do continued challenges in the global economy" 

The company has also elected to keep out of the mobile game market, saying it still wasn't convinced the territory had produced sustainable franchises.

"I think we've always said we're constantly exploring all different platforms for opportunities, but I don't think we exactly share your view that three months suggests that they're sustainable franchises," said Kotick in response to a question by analyst Doug Creutz.

"If you look at the last four or five years, you've seen changes in the top ten almost every year that are significant. Nothing that's driven any sizable amount of operating profit.

"While we're going to continue to look at it, and we think that over the long term there'll be opportunities, right now we just don't see anything that would suggest that changing the way we approach investing against mobile would be a good idea."

After the report Activision's stock dropped by six per cent. This can be compared to a 17 percent rise in EA share prices despite that publisher posting earnings and profits below initial guidance.

Even this comparision is somewhat missleading; a six perc ent drop isn't catastrophic for a company that has been trading at the top of the industry charts.

Activision is one of the only companies in the industry that has showed consistent positive growth in the past few troubled years.

The concerns for the future centre around increased competition for Skylanders as Disney moves into the market as well as a possible drop in sales for the next Call of Duty.

The poor sales of the Wii U comes with its own concerns and Activision showed a certain temerity where EA was bullish on the new wave of consoles.

Activision was careful to package these concerns with tidbits of optimism; Call of Duty was much stronger this Q1 than last year for example.