Macro Tsimmis

intelligently hedged investment

Archive for February, 2011

Activision Blizzard (ATVI) update #22—OK 4Q10 results, disappointing guidance

Posted by intelledgement on Thu, 10 Feb 11

Our game publishing company, Activision Blizzard (ATVI), announced 4Q10 results yesterday and while they generally met expectations—down a tad from 2009’s fourth quarter but overall better for the full 2010 year than 2009—the outlook for 2011 was very disappointing: the company is projecting a decline in annual revenues. In addition, management announced the disbanding of the Guitar Hero business unit and dropping of plans for a 2011 Guitar Hero release “due to continued declines in the music genre.”

CEO Bobby Kotick emphasized the company’s strong online presence in his comments: “Activision Blizzard’s key franchises have larger audience bases than ever before and we continue to see significantly enhanced user activity and engagement for our expanding online communities.  Our revenues from digital channels, which now account for over 30% of our overall revenues, were driven by increased sales of Activision Publishing’s Call of Duty map packs and value-added services for Blizzard Entertainment’s World of Warcraft…. Notably, since Call of Duty: Black Ops was launched in November players have spent an average of 52 minutes per day playing online, roughly equivalent to the 55 minutes that the average user spends each day on Facebook. As of February 2, 2011, more than 27 million gamers have played Call of Duty games online, logging more than 2 billion hours, or the equivalent of more than 229,000 years of gameplay…. We expect to continue to drive long-term growth, increase our return on invested capital and generate strong cash flow as we have over the last few years. Our strong balance sheet affords us the financial flexibility to invest in games that few companies have the ability to create and allows us to provide our shareholders with value through dividends and share repurchases.”

4Q10 revenues declined from $1.6 billion in 4Q09 to $1.4 billion, but for the full year, 2010 sales were an all-time record $4.5 billion, as compared to $4.3 billion in 2009. The company lost 20 cents per share in 4Q10 as compared with a loss of 23 cents per share in 4Q09. For the full year, the company was in the black by 33 cents per share—another all-time best—as compared to nine cents per share of earnings for 2009; earnings were improved year-over-year for every single quarter in 2010.

Unfortunately, 2011 does not look so bright. Company guidance includes revenues of $4.0 billion (a decline from 2010) and earnings per share of 56 cents (an improvement). This includes projected 1Q11 revenues of $1.3 billion, and earnings per share of 28 cents, both slight declines from the 2010 numbers.

Highlights included:

Also, the company announced a new stock repurchase program authorizing the repurchase of up to $1.5 billion shares of common stock. The $1 billion share buyback announced in February 2010, expired at the end of the year. Activision Blizzard purchased 86 million shares of ATVI for approximately $966 million under the 2010 program. And, according to the press release, “the Board of Directors also declared a cash dividend of $0.165 per common share payable on May 11, 2011 to shareholders of record at the close of business on March 16, 2011.  This is the company’s second-ever cash dividend and it represents a 10% increase over its first-ever dividend that was issued in 2010.”

Previous ATVI-related posts:

Advertisements

Posted in B.2 Spec Equity Updates | Tagged: | Leave a Comment »