Activision posts 'better-than-expected' Q1 2013 earnings, but is cautious about rest of year

Activision reported "better-than-expected" financial results for the first quarter of 2013 today, but according to CEO Bobby Kotick, the company expects to encounter a more challenging back half of the year.

The publisher brought in net revenues of $1.32 billion during the quarter that ended March 31, a 13 percent improvement over the same period in 2012 and 14.1 percent ahead of the company's projections. Activision also showed a marked year-over-year jump in net income from $384 million to $456 million, a 13.75 percent increase.

Activision's earnings were buoyed by the impressive sales performance of StarCraft 2: Heart of the Swarm, which was the top-selling Windows PC game in North America and Europe even though it launched with three weeks left in the quarter. In addition, Diablo 3, Skylanders Giants and Call of Duty: Black Ops 2 all continued to sell well.

But the long-running MMO World of Warcraft suffered a precipitous drop of 1.3 million subscribers, about 14 percent of its user base, over the course of the quarter. That leaves the game with 8.3 million paying users worldwide — still enough to keep the game in the top spot when it comes to subscription-based massively multiplayer online RPGs. During Activision's first-quarter investor call this afternoon, Kotick said the company expects World of Warcraft subscribers to be lower by the end of 2013.

"While we have had a solid start to the year, we now believe that the risks and uncertainties in the back half of 2013 are more challenging than our earlier view, especially in the holiday quarter," said Kotick in an investor release announcing Activision's first-quarter results. Kotick cited the drop in World of Warcraft users, the poor performance of the Wii U, uncertainty surrounding next-generation consoles and increased competition.

The competition will be stiff. Activision is set to launch a third Skylanders title, Skylanders Swap Force, this fall into a market where Disney Interactive's Disney Infinity — a similar family-friendly title with physical toys — has already been released. And while the next Call of Duty title, Call of Duty: Ghosts, will be released Nov. 5, Activision said earlier this year that it expects poorer sales performance from Ghosts than from Black Ops 2.

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