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Cowen predicts "blowout quarter" for Activision

Analyst expects $4.7bn revenue from Q4, believes 2012/13 growth likely

Analyst Cowen and Company has raised its expectations of Activision-Blizzard ahead of the publisher's Q4 and fiscal 2010 earnings call on February 9.

For the financial year just ended, Cowen has altered expected revenues from $4.58 billion to $4.77 billion, as "We expect strong sales of Call of Duty: Black Ops and World of Warcraft: Cataclysm to drive a blowout quarter."

The next financial year's estimate increases slightly to $4890 million (from $4804 million), describing the firm's "multi-year pipeline as quite robust" despite investor concerns about potentially hitting a ceiling of growth.

Wrote Cowen's Doug Creutz, "We believe that despite some challenges, Activision can grow earnings in FY11, based on continued growth from the Call of Duty franchise and likely new output from Blizzard."

However, he predicted only "modest" contributions from other Activision titles such as True Crime: Honkg Kong. "We do not assume any significantly improved performance from the rest of the company's game portfolio."

He also observed that "Guitar Hero: Warriors of Rock and DJ Hero 2 failed to sell 1 million US units combined in 2010, with total unit sales 63% below that of Guitar Hero 5/DJ Hero/Band Hero in 2009," but reasoned that this had not ultimately affected the publisher's fortunes.

Creutz expected more growth from the Call of Duty franchise in 2011 due to an expanding console hardware install base, but did project an ongoing decline in the franchise's tie ratio. However, DLC sales would likely grow.

Cowen's predictions for next year were based on assumptions that Blizzard titles Diablo III and StarCraft II: Heart of the Swarm would arrive during fiscal 2011. This meant that Cowen believes Activision-Blizzard "shares can outperform the market by at least 20% over the next 12 months."

For 2012-13, it hoped for good things from Activision's secret Bungie game, Blizzard's next MMO (rumoured to be known as Titan) and a spin-off Call of Duty series from Sledgehammer.

Cowen felt that this franchise extension could "debut with at least 5 million in worldwide unit sales" but expected it to be delayed until as far as 2013 due to Sledghammer's alleged assistance with Infinity Ward's current title.

Creutz also observed that "we assume 10.5 million US Xbox 360/PS3 consoles sold in 2011, down slightly from the 11.1MM sold in 2010; we do assume console price cuts in the second half of the year for both devices."

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Alec Meer: A 10-year veteran of scribbling about video games, Alec primarily writes for Rock, Paper, Shotgun, but given any opportunity he will escape his keyboard and mouse ghetto to write about any and all formats.
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