(Reuters) – Activision Blizzard Inc forecast full-year earnings and revenue below analysts’ estimates on Tuesday and said that it would invest more in the development of the game franchises if the company is facing heavy competition from games such as “Fortnite”.
FILE PHOTO: Attendees walk past a “Call of Duty” – advertising at E3 2017 the Electronic Entertainment Expo in Los Angeles, California, USA June 13, 2017. REUTERS/ Mike Blake
However, the profit beat estimates by a penny and the game publisher announced a new share buyback program of up to $ 1.5 billion, while saying it would cut about 800 jobs to focus on the development of its games franchises, sending its shares up 3 percent in after-market trading.
The company had 9,800 employees by the end of 2017.
As part of the restructuring of the actions, Activision expects to incur a pre-tax charge of approximately $150 million, of which the largest part is expected to be incurred this year.
However, Activision said that the number of developers working on the games, such as “Call of Duty”, “Candy Crush” and “Overwatch” in total will increase by about 20% in the course of the year 2019.
“ATVI’s focus on key game franchises on a net headcount reduction is the correct path on the return to growth,” Benchmark Co analyst Mike Hickey said.
Activision’s results follow weak reports of rival publisher Take-Two Interactive Software, Inc and Electronic Arts Inc, adding to the fear that the competition of the free-to-play battle royale games “Fortnite” and “PUBG”, the food was in the sale.
The battle royale format, which allows dozens of players to battle each other to the last survivor, was extremely popular in 2018, and the two games are credited with the introduction of new audiences to gaming.
“In 2019 will be a transition year for us,” Chief Financial Officer Dennis durkin said.
“Given the limited frontline releases, the organization of work underway and the current competitive environment, we plan to make this year the decline year-on-year,” durkin added.
EA and Take-Two popped up last week when their predictions came in short of analysts estimates.
Activision’s full-year outlook for adjusted earnings of $2.1 per share and revenue of $6.30 billion came in below Wall Street estimates. Analysts were expecting a profit of $2.54 per share and revenue of $7.25 billion, according to the IBES data of Refinitiv.
The company said that it will not generate the material revenue of the “Fate” game franchise in 2019 as a result of the sale of the publishing rights to Bungie in January.
For the fourth quarter, Activision reported total adjusted revenue of $2.84 billion, missing estimates of $3.04 billion.
Excluding items, the company earned $1.29 per share, net to the estimates of $1.28 per share.
Reporting by Arjuna Panchadar in Bengaluru; Editing by Shounak Dasgupta