Activision Rocks Past Financial Expectations

Guitar Hero publisher sees massive year on year growth

Posted by Staff
Activision Rocks Past Financial Expectations
Activision has posted higher than expected financial results for its third quarter, citing the success of Call of Duty 4 and Guitar Hero III.

The publisher, which is waiting for approval on a merger with Vivendi, posted a net profit of $272.2 million (£139.66 million), compared with $142.8 million (£73.26 million) for the same quarter a year prior. Revenue was up a massive 80% to $1.48 billion (£759.5 million), compared to $824.3 million (£422.998 million) the year before.

The company also said that it expects revenue to be $350 million (£179.7 million), around 25% higher than estimates by Wall Street analysts.

The company expects licenses of upcoming movies Kung Fu Panda and James Bond to do well for it. The really big earner, however, will be Guitar Hero III according to Activision's Chief Executive, Bobby Kotick. "All those products will be important this year but Guitar Hero III will probably be the most important. We are making progress (in Europe) on the inventory front, on getting local content. We are definitely a year behind in Europe versus what we did in North America."

Ed Williams, an analyst with BMO Capital Markets, wasn't entirely convinced that Activision can repeat the game's North American performance in Europe. “What's yet to be demonstrated is whether demand for Guitar Hero will be as robust throughout Europe as a whole as it has in the North American market", he said.

Kotick also sang the praises of Activision's US performance. "For the first time, we were the Number 1 US console and handheld publisher for the calendar year, according to The NPD Group”, he said. “With videogame software sales increasing 37% in the United States overall, the videogame market growth exceeded even our own forecasts, and we believe this momentum will continue over the coming years. Broader audiences are responding to products like Guitar Hero and we expect that the demographics for videogames will continue to expand."

Activision also revealed that its international publishing net revenues (i.e. outside the US) grew 106% .

Shares only rose 0.9%, however. Kaufman Bros analyst Todd Mitchell puts that down to investors taking a wait-and-see approach to Activision's upcoming merger with Vivendi."When you get somewhere closer to actual consummation of the deal, people will sit down and decide whether they want to own this", he said.

Over the past year, however, Activision's shares have risen 55%, compared to a fall of 11% for both Electronic Arts and Take-Two.

Source: Reuters

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