Activision Blizzard Inc. reported earnings and revenue that missed analysts' estimates just weeks after Microsoft Corp. announced its $69 billion acquisition of the video game publisher.

Adjusted revenue fell 18% to $2.49 billion in the fourth quarter, Activision said in a statement Thursday. Analysts had expected $2.84 billion, according to an average of estimates compiled by Bloomberg. Adjusted earnings per share were $1.25, compared with analysts' forecasts for $1.31. The company cited "lower than expected performance" in its Activision division, which produces Call of Duty.

Microsoft swooped in at a crucial time for Activision, which is behind hit games such as Candy Crush and World of Warcraft. The company, based in Santa Monica, California, has been rocked by allegations of rampant sexism and harassment, highlighted in a lawsuit from California's Department of Fair Employment and Housing last July. The controversy caused executive-level shake-ups and broad discontent among employees.

Some 2,000 workers have signed a petition to remove Chief Executive Officer Bobby Kotick after the Wall Street Journal reported that he was long aware of some of the allegations of sexual misconduct at the company, and neglected to inform the board. Three employee walkouts and the beginnings of union organizing — at Activision Blizzard and subsidiary game studio Raven Software — have punctuated six months of persistent upheaval among a swath of developers. Kotick has apologized publicly for the behavior reported at Activision Blizzard and has promised to make the company a more inclusive place to work.

"As we look to the future, with Microsoft's scale and resources, we will be better equipped to grow existing franchises, launch new potential franchises and unlock the rich library of games we have assembled over 40 years," Kotick said in the statement.

Microsoft's offer may have been a saving grace, analysts said, given that the cultural turbulence and ensuing attrition has taken a toll on the company's ability to stick to its game release schedule. Already Activision has delayed the highly anticipated titles Diablo IV and Overwatch 2 to 2023 or later. Diablo Immortal is expected to be released early this year, although there is no set date yet.

The turmoil also contributed to Microsoft's move to purchase Activision, whose stock had plunged. Xbox head Phil Spencer, now CEO of Microsoft Gaming, approached Kotick late last year.

Kotick, who has headed the company for 30 years, is expected to continue as CEO until Microsoft's acquisition closes, which could take until mid-2023 as the Federal Trade Commission and other regulators review the deal. Kotick said in an interview with Bloomberg last month that the deal had nothing to do with the controversy surrounding Activision or the pressure on him as CEO.

The merger also gives analysts something more positive to focus on, rather than Activision Blizzard's fundamentals, which, right now, are shaky. "The long-term prospects of Activision are much softer," said Joost van Dreunen, former CEO of gaming research firm SuperData Research and a professor at New York University's Stern School of Business. "Better to add themselves to a platform like they did for Microsoft. That solves the problem of their lack of content strategy." Van Dreunen says Microsoft's oversight may also help "ameliorate a lot of the cultural problems they had," due to historically higher scrutiny applied to the tech giant.

Microsoft plans to incorporate Activision Blizzard's treasure trove of games into its Game Pass subscription service, which boasts 25 million subscribers. The deal also gives Microsoft a boost in mobile gaming with Activision Blizzard subsidiary King, developer of hit game Candy Crush, which was acquired by Activision in 2015 for $5.9 billion.

Revenue in Activision's mobile games division rose 18% in the quarter, reflecting solid growth in net bookings in Candy Crush and Call of Duty Mobile. Net bookings, a measure of sales of virtual goods and licensing fees, in Call of Duty Mobile "grew strongly" in 2021, driven by demand from China. Worldwide spending on the title exceeds $1 billion, Activision said. Candy Crush in-game spending grew 20% from a year earlier, making it the top grossing game franchise in U.S. app stores.

Activision's Blizzard division is planning "substantial new content" for its Warcraft franchise, including "all-new mobile Warcraft content." In 2018, Kotaku reported that a Warcraft take on Pokemon Go may be in the works. Revenue from consoles fell 31% from a year earlier and and PC gaming dropped 12%.

The Microsoft deal has sparked concern that Activision will begin favoring the Xbox console over Sony Group Corp.'s PlayStation. But Activision plans to release at least the next three games in its mainstay Call of Duty franchise on the PlayStation, Bloomberg has reported.

This year is already shaping up to be a blockbuster year for mergers in the gaming industry, with acquisition activity in the sector hitting an all-time high in the first month. In addition to Microsoft's offer for Activision, Take-Two Interactive Software Inc. said it will buy Zynga Inc. in a deal valued at $11 billion. And last week Sony agreed to buy Destiny developer Bungie Inc. for $3.6 billion.

In light of the pending Microsoft acquisition, Activision didn't hold an analyst call or provide an outlook.

Cecilia D'Anastasio reports for Bloomberg News.

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