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Activision Blizzard Beats Expectations, Bolsters Guidance

Blockbuster games boosted Activision Blizzard despite a rough video game market.

The game maker beat expectations thanks to strong sales of "Call of Duty" and "World of Warcraft." A one-time $240.9 million write-down on deferred game revenue (online game revenue comes in over time) pushed the company's results to loss. But excluding that one-time item, Activision's adjusted profit came in at 49 cents per share, higher than last year and beating Wall Street projections.

The outlook for 2010 is pretty much in line with what Electronic Arts said in its earnings earlier this week -- video game sales are expected to be pretty much flat or slightly down this year. How game-makers do depends on cost management and their ability to produce can't-miss hits.

One factor lifting Activision's stock after hours: the company raised its guidance. The company's projections are for adjusted earnings of 70 cents per share for the year, which is less than what Wall Street's expecting, but it's progress. In other good news the company a $1 billion stock buyback, and for the first time issued a dividend of 15 cents per share.

Activision Blizzard's CEO Bobby Kotick presented this quarters' results as a triumph of the "diversity and character" of the company's revenue. The company is geographically diverse, selling video games worldwide. And its games are pretty wide-ranging, from Guitar Hero for casual gamers, to "Call of Duty" for the core audience, to branded franchises including Spider-Man, X-Men and James Bond. And we can't forget about "World of Warcraft," the largest subscription based MMOG (massive multiplayer online game).

There's no denying that the market is tough, and visibility on consumer spending is hazy.

Game companies, including Activision Blizzard, have done a good job of providing low-cost ad-ons to pricier games, i.e. allowing you to buy a new song for a $50 Guitar Hero game. That means that users can update their gaming experience without shelling out $50 or $60 for a whole new game. And that's bad news for the game makers when consumers wallets are tight. That puts more pressure on the big "event" games like "Call of Duty." The latest in that series broke records last fall as the biggest-ever launch of any type of media product. We'll see what Kotick can deliver next.

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