Will Activision Blizzard Sink or Swim?

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Tomorrow is the day for Activision Blizzard (Nasdaq: ATVI  ) investors to mark on the calendar, as the company's fourth-quarter earnings are set to be released after the closing bell. What kind of digits can shareholders look forward to?

Looking at consensus estimates, analysts are expecting revenue in the fourth quarter to come in at $2.2 billion, which would be a 14% fall from the prior year's $2.55 billion in sales. The bottom line is expected to improve to $0.56 in earnings per share, a notch higher than the $0.53 per share profit a year ago.

The headline numbers won't tell the whole story, especially considering that Activision put up a beat last quarter but still sold off over concerns about one of its biggest cash cows, World of Warcraft, losing 800,000 subscribers, or 7% of its player base, during the third quarter. All eyes will likely be on WoW's performance, especially since rival Electronic Arts (Nasdaq: EA  ) just released its own Star Wars: The Old Republic over the holidays, a competing massively multiplayer online role-playing game, or MMORPG.

EA ended up topping estimates when it reported last week, and it also mentioned that The Old Republic sold 2 million copies in its first month, growing its active subscriber base up to 1.7 million. The game comes with a free 30-day trial, so we'll have to wait to see how those figures withstand the test of time.

Looking at fellow game makers' results, Take-Two Interactive (Nasdaq: TTWO  ) reported last week to little fanfare, with Max Payne 3's painful delay weighing on results while everyone is still waiting for a release date of the next installment of its blockbuster franchise, Grand Theft Auto.

Activision has been embracing mobile gaming platforms, but online subscriptions and consoles are still the lion's share of sales. I'll be watching to see if those WoW figures can wow investors.

Don't forget to add Activision to your watchlist so you don't miss its digits tomorrow.

Fool contributor Evan Niu holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Take-Two Interactive Software and Activision Blizzard. The Fool owns shares of and has written calls on Activision Blizzard. Motley Fool newsletter services have recommended buying shares of Take-Two Interactive Software and Activision Blizzard; and creating a synthetic long position in Activision Blizzard. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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  • Report this Comment On February 09, 2012, at 8:13 AM, Thumpa28 wrote:

    I cant claim to be a massive investor, but i do know my MMOs. I can honestly say that from the small slice of the gaming community that I watch daily, a number of things are blatantly obvious on the ground floor.

    1. EA is in trouble as far as SWTOR is concerned. SWTOR suffers from a number of fatal flaws for any MMO. A horrible graphics engine that has to limit the number of players on screen due to stutter - this is the Hero engine which EA decided to buy and modify themselves in 2007. The current Hero engine is much better but not backward compatible with EAs version. There is mass exploiting of bugs in the game at high level, coupled with minimal content for end-game players. The game basically feels and plays like a single player with co-op elements, and that is not conducive to paying monthly subs. Finally there is a host of competition for SWTOR just around the corner. TERA, a highly polished MMO from the Far East, has been adapted to western audiences and is released in April. The highly anticipated 'one-payment no sub' Guild Wars 2 is pending. Mists of Pandoria (a WoW expansion) *possibly* hits later this year.

    3. With the above in mind, I expect Blizz to show an increase in subs, reversing the trend set in the last quarter. One reason for this will be players leaving SWTOR and going back to safe ground. Various analytics of traffic on websites have seen a jump in visits to WoW sites, I expect this to be a result of a return.

    Basically, I am no expert in this but I find the EA results baffling. I find the 1.7m subscribers number hard to swallow unless they are talking all time subs. I may be way off centre here but the numbers and what im seeing on the ground floor just do not add up. I will be watching the next EA statement very closely.

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