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Activision Misses Estimates on Lackluster Call of Duty

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(Bloomberg) -- Activision Blizzard Inc., the U.S. video game giant that’s being purchased by Microsoft Corp., reported earnings and revenue that missed analysts’ estimates, largely due to the underwhelming performance of last year’s Call of Duty game.

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Adjusted revenue in the first quarter fell 28% to $1.48 billion, the company said in a statement on Monday. Analysts had expected $1.81 billion. Adjusted earnings per share were 38 cents, compared with estimates of 72 cents, according to data compiled by Bloomberg.

The miss follows the November launch of Call of Duty Vanguard, the latest entry in Activision’s biggest video game series, which the company said hadn’t performed as well as expected. The WWII shooting game’s poor showing was partly due to competition from other highly anticipated releases like Halo Infinite and Battlefield, but Vanguard also received mediocre reviews. World War II-themed entries in the Call of Duty series also tend to underperform compared with titles set during the Cold War or modern times.

After the disappointing reception, Activision will release a new Modern Warfare this year, but is planning to skip a Call of Duty for 2023 entirely, people familiar told Bloomberg earlier this year, marking the first time the franchise will be without an annual mainline release in nearly two decades. Instead, Activision will release new content for 2022’s Modern Warfare game among other spinoffs. Call of Duty games regularly top yearly sales charts and have sold more than 400 million units since the series began in 2003.

The biggest video game company in the U.S., Activision also owns popular franchises such as Warcraft and Candy Crush. The company blamed its poor results in part on delays in Warcraft’s production schedule, which it said offset a strong performance from Candy Crush and the King division.

Alongside the earnings results, Activision’s Blizzard division said that the upcoming mobile game Diablo Immortal will be out on June 2. The game, developed in conjunction with China-based NetEase Inc., is expected to be a top performer in China. Activision said more than 30 million people have already pre-ordered.

Activision will hold a shareholder meeting on April 28 to vote on the $68.7 billion acquisition by Microsoft. The deal was announced in January and likely won’t close until next year, pending regulatory approval. SOC Investment Group, an activist shareholder group with a small stake, earlier this month encouraged shareholders to vote down the deal and Microsoft’s offer of $95 a share. The stock was down less than 1% to $78.09 in New York at 9:40 a.m. on Monday.

Santa Monica, California-based Activision has faced turmoil since last summer, when California’s Department of Fair Employment and Housing filed a lawsuit against the company for sexual harassment and misconduct. In the months that followed, shares plummeted and employees walked out in protest, calling for Kotick’s resignation. The stock has gained about 20% since the Microsoft deal was announced in January.

Earlier this month, Bloomberg reported that the top lawyer behind California’s suit against Activision was fired and that her deputy resigned in protest, accusing California Governor Gavin Newsom of interfering with the case.

(Updates with shares in seventh paragraph)

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