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Activision Blizzard share price falls 8%

Stock drop follows lower-than-expected 2011 guidance and shelving of Guitar Hero franchise

Activision Blizzard's share price has fallen sharply following the publisher's calendar 2010 financial results, reported on Wednesday night.

At the close of trading yesterday the stock had fallen by just over 8 per cent to finish at $10.75, giving the publisher a market capitalisation of just under $13 billion.

The price is at its lowest point since the end of August last year, when it dipped to $10.60, and is down from a high since then of $12.57.

In its financial results the company reported a strong final quarter to the year, powered by the releases of Call of Duty: Black Ops and World of Warcraft: Cataclysm - but cut the Guitar Hero and True Crime franchises, estimating the loss of 500 jobs in the process.

But there has been concern about lower-than-expected 2011 revenue guidance, which has been pinned at $3.9 billion - down over $800 million on previous analyst expectations.

However, Wedbush Morgan analyst Michael Pachter maintained an Outperform rating on the company, noting that the announcement of Project Beachhead may be promising.

"Future revenues from Black Ops and other games should trigger multiple expansion, as investors attribute high value to recurring revenue," he wrote in a note to investors.

"Maintaining our Outperform rating and $16 price target, which reflects a forward multiple of 16x our calendar 2012 EPS estimate of $0.80 plus an estimated $3/share in cash. This is well below the low end of Activision's historical multiple range, reflecting declining revenues, continuing industry malaise and the execution risk from the company's restructuring."

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Phil Elliott