Activision Blizzard Inc's first-quarter outlook was below Wall Street expectations and it said would disband the unit that makes Guitar Hero music games, sending its shares down 8 percent.

The company forecast revenue of $640 million in the first quarter of 2011 and EPS of 7 cents per share, compared with the $734.70 million analysts were expecting on 10 cents per share for the quarter.

The company's shares fell to $10.75 in after-hours trading.

Activision Blizzard said it would disband its Guitar Hero business unit and stop development of its Guitar Hero game for 2011 because of declines in the music genre in gaming.

On an adjusted basis costs for deferral of revenues and stock-based compensations, EPS was 53 cents a share, which was above analysts' average estimates of 51 cents a share.

Adjusted for various costs, the company's revenue was $2.55 billion, up from $2.50 billion a year earlier. This was above analysts' expectations $2.36 billion, according to Thomson-Reuters I/B/E/S.

Activision Blizzard, the world's largest stand-alone game publisher, posted a loss of $233 million, or 20 cents a share, compared with a loss of $286 million, or 23 cents a share, a year earlier.

Activision Blizzard also said it would repurchase up to $1.5 billion of outstanding common stock.

The company was formed in 2008 through the merger of Activision with Blizzard, the former games unit of France's Vivendi SA, which still owns more than half the combined company.

Santa Monica, California-based Activision Blizzard shares closed 1.6 percent lower at $11.69 on the Nasdaq on Wednesday.

(Reporting by Liana B. Baker; editing by Bernard Orr and Andre Grenon)

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