Activision stems Warcraft bleeding, eyes holiday

By Malathi Nayak and Liana B. Baker

SAN FRANCISCO (Reuters) - Activision Blizzard Inc raised its earnings outlook on Wednesday and showed investors it was able to bring an end to the exodus of subscribers from its largest Internet game, "World of Warcraft," that had hurt the company in recent quarters.

Investors closely watch subscriber numbers for "World of Warcraft" because the franchise is the company's most profitable business and generates a steady stream of recurring revenue from millions of users who pay $15 a month to play it.

The game, which is 7 years old, has seen its subscriber numbers steadily decline in recent quarters. Activision managed to keep its first quarter "World of Warcraft" subscribers static at 10.2 million compared with last quarter. But it lost subscribers compared with a year ago, when it had 11.4 million players.

"Maintaining our subscribers level puts us in a great position," said Mike Morhaime, the chief executive of the company's Blizzard unit on the conference call.

The next expansion pack of the game, called "Mists of Pandaria," is being tested now by fans and should generate renewed interest in the franchise in coming quarters, he said.

National Alliance Capital Markets Mike Hickey said he was reassured on Wednesday that the company can hold its Warcraft subscribers steady and has successfully fended off its biggest rival, Electronic Arts, which came out with an Internet game of its own in December based on the Star Wars movies.

"To have a stable subscriber base given the nature of the markets that we're in and the competitive threats is a real testament to the strength of the franchise," Hickey said.

On Monday, EA said it lost 400,000 subscribers of "Star Wars: The Old Republic" in the fourth quarter, dealing a blow to its efforts to rely on the new game for growth and sending the game maker's shares down as much as 10 percent.