Activision Blizzard posts $15 million profit, revenue up $23 million

World's top publisher turns small profit on $703 million in sales; $4.05 billion 2009 outlook maintained despite concerns about holiday consumer spending.

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Over the past two weeks, Sony, Microsoft, Nintendo, Konami, Capcom, THQ, Ubisoft, Namco, and Square Enix all released their most recent earnings reports.

Today, it was Activision Blizzard's turn.

Guitar Hero 5 brought in cash, in more way than one.
Guitar Hero 5 brought in cash, in more way than one.

The world's biggest-third party publisher reported $703 million in net revenue for the July-September quarter, up from $680 million during the same period the year prior. More importantly, the company posted a quarterly profit of $15 million, way up from the $108 million the company lost in Q3 2008.

The quarter also saw Activision Blizzard's overall game software market share grow to 13.3 percent in the US. In Europe and the US combined, the company controls 12.3 percent of the software market, according to the NPD Group and Charttrack/Gfk.

In a statement accompanying the announcement, Activision Blizzard's famously outspoken CEO Bobby Kotick credited Guitar Hero 5 and Marvel: Ultimate Alliance 2 as the quarter's biggest two debut games. Also helping fill company coffers were catalog sales of Guitar Hero and Call of Duty games and ongoing income from the massively multiplayer role-playing game World of Warcraft.

Kotick also tried to soothe the fears of analysts about slowing sales of rhythm games--such as Activision's own forthcoming DJ Hero, which is reportedly seeing lower-than-expected preorders. He pointed out that when all SKUs were combined, Guitar Hero World Tour was the top-selling game in the US and Europe for the first nine months of 2009.

"Year to date through September 30, the Guitar Hero franchise was the number-one best-selling third-party franchise in North America and Europe," Kotick said in a statement. "For the month of September, sales of music games in the U.S. increased 72 percent in dollars year over year, which demonstrates the sustained interest in this new and important game category." September saw the release of both Guitar Hero 5 and rival MTV Games' The Beatles: Rock Band, with the latter outselling the former but still managing to be unprofitable.

In the official Activision earnings release, Kotick was bullish on his company's slate for the current quarter, which includes Band Hero, DJ Hero, Tony Hawk: Ride, and next week's Call of Duty: Modern Warfare 2. (The latter title is the now most preordered game in Activision and GameStop history.) However, speaking to Reuters, the executive was more candid, saying he was "very concerned" about recession-hit consumers' spending this holiday season.

Modern Warfare 2 boasts the most preorders in Activision's history.
Modern Warfare 2 boasts the most preorders in Activision's history.

"The question is whether the consumer will materialize, and I think there's huge risk that the consumer won't materialize," he told Reuters.

Kotick's fears aside, Activision is sticking by its full calendar year earnings guidance of $4.05 billion in net revenues and $0.26 earnings per diluted share of $0.26. It did warn, however, that the figure was subject to certain risks, such as World of Warcraft's ongoing struggle to switch localization partners in China. Earlier this week, operation of the MMORPG was threatened in the Asian nation by a dispute between two regulatory agencies of the Beijing government.

Finally, during a conference call with analysts after the report's release, Activision executives confirmed it was planning to release new installments in the Call of Duty, Guitar Hero, Tony Hawk, and Spider-Man franchises in 2010.

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