Activision reports larger 4th-quarter loss on charges, adjusted results surpass expectations

Activision has loss; buyback, dividend help stock

NEW YORK — Activision Blizzard Inc. widened its losses in the fourth quarter because of accounting changes and a hefty reduction of the value of its music games and other titles aimed at casual video game players.

The company also said it remains cautious about the economy, and its 2010 forecast fell below analyst expectations. However its shares rose 4 percent in extended trading after Activision said it would buy back up to $1 billion of its stock and would pay its first dividend, 15 cents per share annually.

The maker of “Call of Duty” and “World of Warcraft” lost $286 million, or 23 cents per share, in the last three months of 2009. This compares with a loss of $72 million, or 5 cents per share, a year earlier.

Revenue fell 5 percent to $1.56 billion.

But the company beat Wall Street’s expectations with its adjusted results. Those exclude one-time charges and account for deferred revenue on games whose online components reap sales over an extended period.

On this basis, the company earned $632 million, up 47 percent from a year earlier. Its adjusted profit of 49 cents per share was above the 43 cents that analysts polled by Thomson Reuters were expecting.

Adjusted revenue was $2.5 billion, beating analysts’ expectations for $2.23 billion.

The company, which is based in Santa Monica, Calif., and majority owned by French conglomerate Vivendi SA, has been able to weather the economic downturn better than many other video game companies, such as Electronic Arts Inc.

CEO Bobby Kotick said in an interview that loyal players who spend dozens of hours on games, even in a difficult economy, continue to be Activision Blizzard’s “principal market opportunity.”

“It’s that consumer that’s allowed us, for 20 years, to be successful,” Kotick said.

Meanwhile music games like “Guitar Hero” have been less reliable for the company because they are aimed at more casual players, for whom video games are discretionary spending, not a must-have. Activision’s earnings were reduced 19 cents per share in the most recent quarter because of a write-down of the presumed value of its music games and other casual titles.

For 2010, Activision forecast adjusted earnings of 70 cents per share on sales of $4.4 billion. This was below analysts’ expectations of a profit of 73 cents per share on sales of $4.8 billion.

Activision shares gained 42 cents to $10.52 in extended trading after the earnings report.