Activision Blizzard Gets Hoped-For Boost From King Digital
May 05 2016 - 6:46PM
Dow Jones News
By Sarah E. Needleman
Activision Blizzard Inc. banked on a one-two punch of growing
digital sales and newly acquired King Digital Entertainment PLC to
deliver strong first-quarter earnings and a more robust full-year
outlook.
The videogame giant's addition of King Digital paid off from the
get-go. The mobile game maker, which Activision acquired in late
February for $5.9 billion, pitched in about 23% of adjusted revenue
in the quarter.
After folding in King's gamers, Activision boasts it now has 544
million monthly active users -- a metric normally used by social
media companies such as Facebook Inc. and Twitter Inc. While more
than three-quarters of those users come from King, the company
behind "Candy Crush Saga," Activision is growing other properties,
too. It said 50 million people play "Hearthstone: Heroes of
Warcraft," a mobile game from its Blizzard unit.
Activision is eager to tout its engaged base of gamers as it
builds out a division dedicated to competitive gaming, also called
e-sports. Next week, Activision is expected to make its e-sports
pitch at NewFronts, an annual digital-media conference.
Piper Jaffray analyst Mike Olson said one way King could squeeze
more money out of its games is through advertising. The company
ditched in-game ads in 2013 in favor of promoting only its own
titles. "We think [advertising] is a no-brainer," Mr. Olson said.
"It's basically free money."
A day ago, Zynga Inc. reported better-than-expected results in
part due to growing advertising revenue.
Activision posted adjusted revenue of $908 million, up 29% from
a year earlier. Its adjusted profit rose to 23 cents a share from
16 cents a year ago.
Activision's shares, which have risen 50% in the past year,
closed up 1.8% at $34.91 at 4 p.m. in New York. In after-hours
trading, shares were up 2.8% at $35.89.
The results trounced forecasts from Wall Street, which already
had thought Activision was playing it too conservative with the
numbers. Analysts surveyed by Thomson Reuters had expected adjusted
revenue of $812.9 million and profit of 12 cents a share. Both
figures were more than Activision had forecast for the quarter.
Under U.S. accounting rules, videogame companies defer some
revenue from certain online-enabled games. Adjusted revenue counts
all sales in the quarter, along with excluding certain factors Wall
Street and the company don't consider a regular part of
business.
Activision continues to reap the rewards of the industry's
embrace of digital downloads. Revenues from content sold inside of
Activision and Blizzard games rose 20% from a year earlier -- 80%
when factoring in King. Activision said it doubled the number of
"Call of Duty" gamers who made in-game purchases, though the amount
of money it generated from these buyers held steady.
Adjusted digital revenue rose 48% from a year ago to $797
million. Sales of digital content such as full games, expansion
packs and virtual goods made up 88% of total adjusted revenues.
Activision's revenue under generally accepted accounting
principles rose to $1.46 billion from $1.29 billion. Net fell to
$336 million from $394 million.
Activision expects second-quarter adjusted revenue of $1.38
billion and adjusted profit of 38 cents a share. The company nudged
up its full-year outlook. It now expects $6.28 billion in adjusted
revenue, up from $6.25 billion, and $1.78 in per-share profit, up
from $1.75. Wall Street expects full-year adjusted revenue of $6.3
billion and per-share profit of $1.76.
Write to Sarah E. Needleman at sarah.needleman@wsj.com
(END) Dow Jones Newswires
May 05, 2016 18:31 ET (22:31 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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