Activision Blizzard Gets Hoped-For Boost From King Digital -- Update
06 May 2016 - 8:57AM
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.
On a conference call with analysts, King Digital Chief Executive
Riccardo Zacconi said one way the company may be able to squeeze
more money out of its games is through advertising. The company
ditched in-game ads in 2013 in favor of only promoting its own
titles. But recently it's begun experimenting with ads again in two
of its games.
"Advertising could be a meaningful revenue stream for King in
the long term," Mr. Zacconi said. "It is early days."
Piper Jaffray analyst Mike Olson said the move would be "a
no-brainer."
"It's basically free money," he said.
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 18:42 ET (22:42 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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