Shares of Activision Blizzard Inc. (ATVI) - Get Report rose after-hours on Tuesday despite reporting fourth quarter earnings that missed analyst revenue and earnings estimates as the company set plans to lay off about 8% of its staff.
The stock initially fell more than 4% after results were released, but was recently up 3% to $42.89, after having risen 3.89% in regular hours.
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Adjusted earnings-per-share came in at 90 cents, missing estimates of $1.28, while revenue was $2.38 billion, versus expectations of $3.04 billion. GAAP earnings-per-share came in at 85 cents, beating Wall Street expectations of 59 cents. GAAP net income was $650 million.
Management's guidance for 2019 also was well short of analyst estimates. Activision guided for calendar year 2019 revenue of $6.025 billion and adjusted EPS of $1.85, versus expectations of revenue of more than $7 billion and adjusted earnings of $2.50 a share.
Activision said that it would increase development investment in its most popular games in 2019, with the number of developers working on Call of Duty, Candy Crush, Overwatch, Warcraft, Hearthstone and Diablo increasing by about 20% this year. To fund those investments, Activision will cut back on investments in other games and reduce costs across the company and integrate various divisions, an apparent reference to layoffs that was reported by Bloomberg last week. On the call, the company said those layoffs will amount about 800 positions. Those restructuring moves will cost the company a GAAP-only pre-tax charge of about $150 million, most of which would be incurred this year.
"While our financial results for 2018 were the best in our history, we didn't realize our full potential," said Bobby Kotick, chief executive officer of Activision Blizzard, in a press release. "To help us reach our full potential, we have made a number of important leadership changes. These changes should enable us to achieve the many opportunities our industry affords us, especially with our powerful owned franchises, our strong commercial capabilities, our direct digital connections to hundreds of millions of players, and our extraordinarily talented employees."
Activision's stock is down more than 11% this year and has declined 40% over the last six months.