Earnings Preview: Activision Blizzard should meet its Q4 guidance

Activision Blizzard (ATVI) is expected to report Q4 earnings after the market close on Thursday, February 9, with a conference call scheduled for 4:30 pm ET. The consensus estimate is 56c for EPS and $2.20B for revenue, according to First Call. Last quarter, the company beat estimates by 5c and revenue rose 1.2%, but the stock sold off nearly 12% that day as the company reported a larger-than-expected decline in the number of "Warcraft" subscribers. Colin Sebastian of Robert W. Baird believes "Warcraft" may show some additional declines, but that the losses have likely "moderated" of late. "Moreover, it does not appear that 'Star Wars: The Old Republic' is the 'WoW killer' that some had feared," he wrote in a recent note. Guidance provided from management for Q4 is EPS of 55c on revenue of $2.17B. Management said, "For 2011 on a non-GAAP basis, we expect product costs of 28% resulting in the highest gross profit margin in our history driven by our continued transition to digital products and services." The company expects to end the year with installed base of 312M units, up 16% over FY10, and expects the install base of online-enabled consoles to Xbox 360s and PS3s to increase even faster, by 24% to 92M. Guidance for full-year 2011 was raised to EPS of 85c on revenue of $4.25B. Management had said that 2012 was shaping up to be "busiest and most exciting year" Blizzard's history. The company plans on having at least two major releases, and a lot of games coming down the pipeline.