Merger Charges Hurt Activision’s Bottom Line

Activision Blizzard [ATVI] dipped into the red last year after incurring various charges, including a one-time cost related to its merger with Vivendi Games last summer.

The company posted a loss of $107 million, or 11 cents per share on revenues of $3 billion for the year ended December 31. That compares to a net income of $227 million, or 38 cents per share on revenues of $1.3 billion last year.

For Q4, Activision reported a net loss of $72 million, or 5 cents per share on revenues of $1.3 billion. That compares to a net income of $86 million, or 15 cents per share on revenues of $211 million in the same quarter last year. The company fell well short of an average analyst estimate of 29 cents per share.

“Our balance sheet remains strong with no debt and more than $3 billion in cash,” said CEO Bobby Kotick. “"During the year, we successfully achieved our merger restructuring goals, including the elimination of unprofitable product lines, right sizing our organization and integrating disparate accounting and IT systems, all with minimal disruption to our business.”

Highlights for Activision include it being the no. 1 third-party publisher for Wii, the best-selling title in dollars on DS, Guitar Hero, and had the first title surpass sales of $1 billion: Guitar Hero III: Legends of Rock.

Activision will ship Call of Duty: Modern Warfare 2 in Q4, President/CEO Michael Griffith said in the company’s quarterly conference call. Also included will be the resurrection of its Tony Hawk franchise after it lost significant market share to Electronic Arts’ [ERTS] Skate franchise. Activision will also release DJ Hero, a new entry into its popular line of music games. The company said one Blizzard title will be released this year, but declined to say whether that would be Starcraft 2 or Diablo 3.

Activision expects revenues of $4.2 billion and a profit of 22 cents per share this year. The revenue outlook includes a reduction of more than $200 million in revenue from the company's lower margin distribution and the co-publishing businesses and a negative year-over-year impact of more than $400 million from a stronger dollar.

For Q1, Activision expects revenues of $860 million, and a net income of 8 cents per share.