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SAN FRANCISCO (Reuters) - Activision Blizzard Inc (ATVI.O) raised its 2012 outlook on Wednesday on expectations of strong holiday sales of its latest title in the "Call of Duty" franchise, despite competition from Microsoft Corp's (MSFT.O) blockbuster "Halo 4."
Investors are keeping a close eye on action-shooter "Call of Duty: Black Ops II," a game that hits stores next week and advances a franchise that has broken sales records and driven Activision's fourth-quarter performance in past years.
But this year, it will have to contend with Microsoft Corp's (MSFT.O) just-launched sci-fi game, "Halo 4," for holiday-season bragging rights.
"They continue to outperform the industry," R.W Baird analyst Colin Sebastian said. "Another beat and raise for Q4, so management obviously feels confident with the holiday line-up with "Skylanders" and "Call of Duty."
The world's largest video game publisher now expects earnings per share of $1.10 in 2012, compared with 99 cents previously. It raised its revenue estimate to $4.8 billion from $4.63 billion. This beat Wall Street's view of $1.01 earnings per share and revenue of $4.68 billion.
The company's stock rose 3 percent to $11.45 in after hours trading from a close of $11.13 on Nasdaq.
"Microsoft did a very good job with Halo and fortunately it's only on a single platform," the Xbox, Chief Executive Bobby Kotick said in an interview.
"We raised outlook for the year as we're confident "Call Of Duty: Black Ops II" will likely be the most successful video game of the year," Kotick said.
Executives told analysts on an earnings call that "Black Ops II" pre-orders are tracking ahead of the game's previous installment, "Modern Warfare 3," but did not offer specifics.
The company reported higher earnings in the third quarter that also beat Wall Street's expectations.
Net income was up 53 percent at $226 million, or 20 cents per share, from $148 million, or 13 cents per share, in the year-ago period. On a non-GAAP basis, it earned 11 cents a share, beating the average forecast for 8 cents.
Revenue rose 12 percent to $841 million from $754 million a year ago. Adjusted for the deferral of digital revenue and other items, revenue rose about 20 percent to $751 million from $627 million a year ago, surpassing Wall Street's average forecast for $709.8 million, according to Thomson Reuters I/B/E/S.
Fantasy-action game "Diablo III" continues to sell well since its launch in May, executives said. Its "World of Warcraft" franchise also enjoyed a boost in sales after the September release of its latest "Mists of Pandaria" expansion pack.
Investors closely watch subscriber numbers for "World of Warcraft," Activision's most profitable business and the source of a steady stream of subscription-based revenue.
Subscribers to the seven-year-old game have dwindled in recent quarters as users switched to free offerings. Subscribers dropped to 9.1 million in the second quarter from 10.2 million in the first.
But this quarter, users were back up to 10 million after "Pandaria" sold 2.7 million units in its first week, luring gamers back.
Activision, better known for hard core shooter games, is also diversifying its revenue stream and stemming subscriber losses from its bread-and-butter games, for instance with the child-friendly "Skylanders."
It is also expanding internationally and investing in a variety of mobile games for Apple Inc's iPhone and other devices.
In a bid to expand its presence in Asia, the company released the "Mists of Pandaria" expansion pack in China in early October.
And the company announced in July that it plans to take "Call of Duty" to China as a free-to-play online game. Activision has partnered with Tencent Holdings Ltd (0700.HK) an Internet and wireless services provider that will have an exclusive license to operate the shooter game in China. (Reporting By Malathi Nayak. Editing by Andre Grenon)