Not Even a Jedi Can Stop Activision Blizzard

Would you rather be an orc or a jedi? Activision Blizzard (NAS: ATVI) is banking on gamers choosing the former.

The game maker put up solid fourth-quarter and full-year results last night. Net non-GAAP revenue in the fourth quarter added up to $2.41 billion, a decline from the $2.55 billion seen a year ago. Meanwhile, the bottom line improved to $0.62 in adjusted earnings per share. Both figures easily bested what the market was expecting. Activision finished off the year with $4.49 billion in adjusted sales and a $0.93 per share adjusted profit.

When it comes to the guidance game, the first-quarter outlook was pretty light, but the full-year forecast looked a little better. Next quarter, Activision only expects earnings per share of $0.03 on $525 million in sales, which is well below the market's expectations. On the other hand, full year earnings are guided to $0.94 per share on $4.5 billion in revenue, falling short of expectations only by a small margin.

The latest iteration in one of its most successful franchises, Call of Duty: Modern Warfare 3, was ranked the No. 1 best-selling game in 2011, even though it was released in November. Activision launched an online service, "Call of Duty Elite," which is its fastest growing, premium, online service. Skylanders Spyro's Adventure is off to a strong start, and Activision believes it has the potential to become its next $1 billion franchise. Later this year, Diablo III will be released, which promises to revitalize that franchise too.

World of Warcraft still reigns with an iron fist in the MMORPG realm, holding top-dog status with 10.2 million subscribers at the end of 2011. That represents a loss of about 100,000 subscribers, which is a significant improvement to the 800,000 night elves, taurens, and dwarves lost last time around.

The smaller losses help address some of the fears that Electronic Arts' (NAS: EA) new MMORPG, Star Wars: The Old Republic, is turning some of Activision's players to the dark side. The Old Republic is off to a strong start, but we'll need to see how many of those padawans end up sticking around after they've used up their free trials.

Activision continues to return cash to investors, cranking up its dividend by 9% to $0.18 this quarter. On top of that, the board has authorized a new stock repurchase program that tops out at $1 billion.

Activision's brand strength is just one reason why it's a much better pick than social butterfly Zynga (NAS: ZNGA) , whose business model is dubious at best. I'm also going to go ahead and give Activision an outperform CAPScall, since this company plays for keeps.

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At the time thisarticle was published Fool contributorEvan Niuholds no position in any company mentioned.Click hereto see his holdings and a short bio. The Motley Fool owns shares of Activision Blizzard. The Fool owns shares of and has written calls on Activision Blizzard.Motley Fool newsletter serviceshave recommended buying shares of Activision Blizzard.Motley Fool newsletter serviceshave recommended creating a synthetic long position in Activision Blizzard. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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