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Activision's first-quarter profit and revenue beat forecasts

The games giant's net income drops 23.7% and revenue declined 19% from the first quarter of 2011.

May 10, 2012|By Alex Pham, Los Angeles Times

Continuing its uncanny ability to surf from one blockbuster hit to another, Activision Blizzard Inc. posted first-quarter revenue and profit that exceeded Wall Street's expectations, thanks in large part to the success of Skylanders: Spyro's Adventure, a popular children's game with a suite of collectible physical toys.

Still, the Santa Monica games giant's net income for the quarter that ended March 31 dropped 23.7% to $384 million, or 33 cents a share, from $503 million, or 42 cents a share a year earlier. Revenue declined 19% from a year earlier to $1.17 billion.

The drop in revenue stems partly from a slide in the number of subscribers for Activision's massively profitable online game World of Warcraft. The title, developed by Blizzard Entertainment in Irvine, had been steadily losing players since it peaked at 12 million in September 2010.

But the company reported Wednesday that it was able to halt a precipitous slide in subscribers, maintaining the number at 10.2 million as of March 31 — roughly the same as it was Dec. 31.

The fact that World of Warcraft, now approaching its eighth year, was able to hold its ground was no small feat, given the stiff competition it faced from the December release of rival online title Star Wars: The Old Republic.

Since the launch of Activision's newest successful franchise in October, Skylanders has sold more than 30 million toys at retail, which the company believes surpassed the number of Star Wars licensed toys in the same period. For the first quarter, Skylanders toys and games generated $100 million in sales, helping to counter an overall decline in revenue and profit for the company.

Other titles that contributed to Activision's results include its Call of Duty military shooter franchise, which continues to sell well and has garnered more than 2 million players who pay about $50 a year for access to additional online content.

Activision's results, when adjusted for special charges and deferred income, handily beat Wall Street's expectations.

Analysts, however, pointed out a potential chink in Activision's armor: It has yet to make a major dent in the growing market for tablet, mobile and social games.

"While Activision to date has chosen the best path to weather the console storms, they are potentially at risk of missing a large and profitable segment of the market without more investment in social and mobile," said Colin Sebastian, analyst with Robert W. Baird & Co. "When tablets become a core gamer platform, will Call of Duty be there?"

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