Activision Blizzard, the biggest U.S. video game publisher, raised its earnings outlook as a strategy of focusing on a few key titles seemed to be paying off, boosting its shares more than 2 percent.
Activision, like its rival Electronic Arts Inc, is releasing fewer games each year while it attempts to squeeze as much money as it can out of its top franchises.
Over the past few quarters, Activision has shut down poorly performing games and invested more in its proven successes. In May, it said it would charge players for exclusive services on the Internet for its bestseller, Call of Duty.
Gamers continue to spend more and more time and money with a few must-have games. For this reason, we feel our strategy continues to be very well aligned with the market opportunity, Eric Hirshberg, head of Activision Publishing, told analysts on a conference call.
The company on Wednesday raised its earnings forecast to 77 cents per share, beating Wall Street's average estimate of 75 cents according to Thomson Reuters I/B/E/S.
The company is optimistic about the second half of the year, especially because customers have been reserving piles of its upcoming Modern Warfare 3, the next sequel in the Call of Duty series which shattered records last fall. The new game will hit stores on November 8.
Chief Executive Bobby Kotick said in an interview he could not disclose the number of pre-orders but said they were meaningfully different from last year.
It's sort of surprising because you always go into the launch of a new Call of Duty game with an expectation that ... it's a hard number to beat, but if you look at the player enthusiasm for 'Modern Warfare 3,' I don't know if we've really seen anything like it in our 21-year history.
Executives stressed on the conference call that Zynga, the leader in Facebook social games, is not a threat to its business. Zynga filed with U.S. regulators on July 1 for an initial public offering of up to $1 billion.
Last year, our digital business alone generated about double the revenues and operating income than Zynga did, said the company's finance chief, Thomas Tippl.
For the second quarter, profit rose as more gamers bought content over the Internet for Call of Duty.
Sales rose 2 percent to $699 million, beating analysts' average estimate of $600 million.
Net income grew to $335 million, or 29 cents per share. Excluding deferred revenue and restructuring charges, earnings of 10 cents per share were 5 cents above Wall Street's analysts' average estimate.
Activision Blizzard shares rose to $12.11 in extended trading, after closing up 1.1 percent at $11.82 on Nasdaq. The stock is down about 6 percent so far this year.
(Reporting by Liana B. Baker; Editing by Richard Chang)