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Post: Earnings Results: Activision Blizzard delivers a ‘disappointing’ holiday-quarter amid Microsoft offer

Activision Blizzard Inc. delivered disappointing holiday-quarter results in the extended session Thursday as the company’s Activision segment weighed on gains from its Blizzard and King divisions.

Activision Blizzard’s
earnings report came a little more than two weeks after Microsoft
announced plans to buy the videogame publisher for $69 billion.

Microsoft’s record offer completely changed the conversation about Activision Blizzard, which in its last earnings call was still digging itself out from the summer’s public-relations avalanche of sexual discrimination and harassment charges and game delays.

The company reported fourth-quarter net income of $564 million, or 72 cents a share, compared with $508 million, or 65 cents a share, in the year-ago period. Activision Blizzard said adjusted earnings, which exclude share-based compensation expenses and other items, were $1.01 a share, from 76 cents a share in the year-ago period.

Adjusted earnings plus the effect of non-GAAP deferrals was $1.25 a share, compared with $1.21 a share in the year-ago period.

Revenue declined to $2.16 billion from $2.41 billion in the year-ago quarter. Net bookings fell to $2.49 billion from $3.05 billion last year, because of “lower-than-expected performance in the Activision segment, which offset record performance at King,” the company said in a statement. Bookings represent the value of digital products and services sold during a quarter, but part of the revenue from those purchases is often recognized in future quarters.

Analysts surveyed by FactSet had forecast $1.31 a share on revenue of $2.82 billion and bookings of $2.8 billion, based on the company’s forecast of $1.29 a share — adjusted earnings plus the effect of non-GAAP deferrals — on revenue of $2.02 billion and bookings of $2.78 billion.

Activision Blizzard publishes such games as  “Call of Duty” through its Activision label; “World of Warcraft,” “Overwatch,” and “Diablo” through its Blizzard label; and “Candy Crush” through its King label.

Benchmark analyst Mike Hickey, who has a buy on the stock and a $95 price target, called the quarter “disappointing.”

“The ‘Call of Duty: Vanguard’ release disappointed and player engagement in ‘Warzone’ has decreased,” Hickey observed. “‘World of Warcraft’ delivered its strongest engagement and revenue outside of a Modern expansion year in a decade. King’s in-game revenue grew 14% Y/Y to a new record in the quarter, primarily from ‘Candy Crush’ growth of 20% Y/Y.”

“Call of Duty: Vanguard” was released in early November, right after the company’s previous earnings report.

Read: Microsoft’s Activision deal will reportedly be subject to FTC review

The company did not provide a forecast, and said it was not hosting a conference call with analysts because of the pending acquisition, which it said was expected to close in Microsoft’s fiscal year ending June 30, 2023.

Analysts estimate earnings of 74 cents a share on revenue of $1.88 billion and bookings of $1.88 billion for the first quarter, according to FactSet.

Shares were flat after hours, following a 0.4% decline in the regular session to close at $78.95, well below Microsoft’s $95 a share offer. Activision Blizzard shares are down 15% over the past 12 months, while Microsoft’s are up 24%, the S&P 500 index
is up 17%, and the tech-heavy Nasdaq Composite Index
is up 2%

Read: The pandemic boom in videogames is expected to disappear in 2022

On Tuesday, Electronic Arts Inc.
one the few large videogame publishers not caught up in some M&A deal so far, issued a lighter-than-expected forecast.

Read: Microsoft could have just kicked off a Big Tech gold rush, which helps videogame stocks but maybe not gamers

In addition to the Activision Blizzard offer in January, Sony Corp. 

said it would buy videogame publisher Bungie for $3.6 billion, and Take-Two Interactive Inc. 
 announced it would acquire Zynga Inc.
 for $12.7 billion.

Take-Two is scheduled to report earnings Monday, with Zynga on Wednesday.

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