08.11 Earnings Round-Up – Activision Blizzard, Commerzbank

on Nov 8, 2012

**Activion Blizzard Goes Against Downward Trend In Retail Games Market And Scores Record Profit**

Activision Blizzard (NASDAQ:ATVI), the world’s biggest gaming company, delivered stellar results in the third-quarter with record GAAP net revenues of $841 million (£526 million), compared to $754 million (£472 million) for Q3 2011. Earnings per diluted share came out at $0.20, 7 cents higher than the third quarter of last year.
“Our unyielding commitment to excellence, the strength of our employees around the globe and our focus on creating great entertainment experiences have enabled us to once again deliver better than expected financial results. We have, for the third straight year, generated over $1 billion of operating cash flow for the trailing twelve month period ending September 30.” said Robert Kotick, chief executive officer.

Digital sales in the company remained largely unchanged at $430 million (£269 million), while retail sales soared by 43 percent to $357 million (£224 million). Activision is going against the trend as most evidence points at a decline of game retail space. According to the company its success lies in the fact that the industry’s top five games now command an overwhelming amount of the market share and smaller games are falling out of favour.

Activision had a number of aces up its sleeve this year, which accounted for its record earnings last quarter. The Skylanders franchise has been especially successful in the US and has an upcoming sequel while Diablo III earned first place as the number one selling PC game in terms of dollars and units sold across the US and Europe, with more than 10 million copies sold.

Most of the company’s digital revenue comes from its flagship game – World of Warcraft and its third expansion Mists of Pandaria. With the release of the newest addition to the game Activision managed to boost its player subscriptions base to over 10 million, up from 9.1 million in Q2.
Activision raised its guidance for the third time in 2012 forecasting revenues to hit $4.57 billion (£2.87 billion) instead of the previously estimated $4.3 billion (£2.7 billion). CEO Bobby Kotick also warned investors that next quarter might be more challenging to the company: “As we look to 2013, we are cautious about business prospects given a continuingly challenged global economy, the ongoing console transition and very difficult year-over-year comparables due to Blizzard’s record-shattering Diablo III sales in 2012,”

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!m[Activision Blizzard Posts Record Profits, Commerzbank Suffers From Low Interest Rates](/uploads/story/750/thumbs/pic1_inline.png)Activision shares have fallen by a bit more than a dollar since their September peak of $12.23 to Wednesday’s closing price of $11.13. In afterhours trading the stock price gained 2.34 percent to $11.39 and is expected to rise more in today’s trading on the US stock exchange.
**Commerzbank Suffers From Low Interest Rates And Eurozone Pessimism**
Commerzbank (FRA:CBK), Germany’s second largest lender, made €78 million (£62 million) in net profit in the third quarter compared to €687 million (£549 million) in the same period a year ago. According to the Interim Report two factors had a particularly negative impact on the bank – on one hand interest rates, already low in 2011, continued to drop this year and on the other customers became increasingly reluctant to undertake business activities. The fall in earnings was only partially offset by reducing operating expenses and creating a very moderate risk environment. “The market environment will remain volatile in the coming months”, chief executive Martin Blessing said. “The payment of dividends for 2012 and 2013 is unlikely from the current stance”
The bank has been going through extensive restructuring after it received an €18 billion (£14.38 billion) bailout in the wake of the financial crisis but the slowing Eurozone is curbing its profits. The German government owns a 25 percent stake in the bank.
Commerzbank’s operating return on equity came out at 12.9 percent at the operating business, which the bank plans to keep expanding. According to analyst Dirk Becker the main question now is what would happen with the €160 billion (£128 billion) in non-core assets, which need to be shed elegantly off the books without incurring high costs.
Shares in the bank lost 4.41 percent to €1.45 during mid-day trading on the Frankfurt Stock Exchange.

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