'Guitar Hero' fails to save Activision

Company posts $72 mil net loss in fourth quarter

The economy is so bad that even the company behind "Guitar Hero," the hottest video game franchise in the world, couldn't muster a profit in the holiday quarter.

Activision Blizzard on Wednesday posted a $72 million net loss in the fourth quarter, compared with an $86 million profit last year. It was the first full quarter for the company since its merger with Vivendi's game unit, so the comparison isn't perfect.

Excluding deferred revenue and some charges, the company would have earned $429 million on net revenue of $1.64 billion. Those numbers beat Wall Street forecasts, but Activision Blizzard offered gloomy 2009 guidance, causing the stock to fall 4% in after-hours trading after rising 1% to $9.48 in the regular session.

Activision Blizzard predicted revenue this year of $4.7 billion, about $500 million shy of what analysts were estimating.

The U.S. recession, though, could provide acquisition opportunities in the near future, executives said on a conference call with analysts Wednesday. Video game stocks have been pummeled along with the rest of the market in the past six months: The biggest, Electronic Arts, is down 65%, and THQ is off 81%.

Activision Blizzard CEO Robert Kotick noted that in 2008 "we had four of the top 10 best-selling games worldwide."

With "Guitar Hero," Activision Blizzard spawned the music genre for video games, which accounts for about 11% of the industry's software sales.

Last year, "Guitar Hero" was the world's biggest-selling franchise, and "Guitar Hero World Tour" was the best-selling video game globally over the Christmas holiday.

The company's underwhelming guidance appeared to catch some experts by surprise, given the strength of its lineup this year.

"Guitar Hero Metallica" will hit shelves this quarter, as will "Monsters vs. Aliens," based on the 3-D movie from DreamWorks Animation.

Metallica has sold 100 million records worldwide and is set to be inducted into the Rock 'n' Roll Hall of Fame next month. The new game features music from Metallica and 20 other bands chosen by them.

Later this year are games tied to the films "X-Men Origins: Wolverine," "Transformers: Revenge of the Fallen" and "Ice Age: The Meltdown." There is also a "DJ" extension for "Guitar Hero" in the works as well as a greatest-hits version of the franchise due this year.