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Activision earnings beat target; forecast falls short

By Malathi Nayak

SAN FRANCISCO (Reuters) - Activision Blizzard Inc reported better-than-expected fourth-quarter income on strong sales of its "Call of Duty" titles during the holidays, helping drive its stock to a five-year high despite a middling first-quarter outlook.

The largest U.S. videogame publisher believes its coming action game "Destiny" will become the company's next billion-dollar franchise, Chief Executive Officer Bobby Kotick said in a statement. The game is expected to launch in September.

After the arrival of the Xbox One and PlayStation 4 consoles in November last year, game software sales slid in December because gamers held back on spending on titles for older consoles.

Analysts expect spending to recover in coming months as more new consoles find their way into gamers' hands and publishers introduce fresh titles.

Activision's strategy "of doing a few things extremely well while keeping a close eye on costs has served us well and we expect it to continue to serve us well in the future," Chief Financial Officer Dennis Durkin said on an earnings call with analysts.

For the first quarter ending March 31, the videogame maker forecast a profit below industry analysts' targets, calling for earnings, excluding items, of 9 cents a share, versus an average forecast of 11 cents a share.

Despite the miss, its stock climbed briefly to a five-year high of $18.60 in after-hours trading, after closing at $17.17 on the Nasdaq on Thursday.

The company, also known for its "Skylanders" games, said its fourth-quarter revenue dropped to $1.52 billion from $1.77 billion a year ago, and net income fell to 22 cents per share from 31 cents per share, in the year-ago period.

The company's fourth-quarter non-GAAP income, adjusted for the deferral of digital revenue and other items, of 79 cents a share was a cent higher than a year ago. Wall Street's average forecast was 73 cents per share, according to Thomson Reuters

I/B/E/S.

Adjusted for the deferral of digital revenue and other items, fourth-quarter revenue dropped 13 percent to $2.27 billion from $2.6 billion a year ago. This was in line with Wall Street analysts' expectations of $2.22 billion, the company said.

In the fourth quarter of 2013, the company's "Call of Duty: Ghosts" - the latest iteration from its popular military-style shooter game series - was the best-selling title in units and sales in the United States and Europe, the company said in its statement.

The Santa Monica-based company's popular "Skylanders" franchise, a children's fantasy-adventure game series sold with toys whose avatars come to life onscreen, touched $2 billion in sales as of December 31. The "Skylanders" line was launched in 2011.

Activison's 2014 pipeline includes new titles from its "Call of Duty" and "Skylanders" series, but the company has yet to announce launch dates.

(Reporting by Malathi Nayak; Editing by Leslie Adler, Chris Reese and Jan Paschal)

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