Activision losses less than expected

Number-two publisher's $18 million shortfall beats own guidance--but next-generation development costs cut into bottom line.

On Monday, the second-largest third-party publisher in the US, Electronic Arts, reported its earnings for the quarter ending June 30. The Redwood City, California-based company beat Wall Street expectations but still lost $81 million during the three-month period, due to expensing of stock options and next-generation development costs.

Today, the nation's number-two third-party publisher, Activision, reported its earnings for the April-June quarter. Like its archrival, it also beat expectations. The company suffered a net loss of $18 million, or $0.06 per share, less than its own projections of an $0.11 loss per share. And, just as EA partially blamed its losses on "the expensing of stock-based compensation," Activision also called out "equity-based compensation" to its employees as a reason for its expanded losses. Without that, the company would have suffered only a $0.05 per-share loss.

That said, the publisher's overall income was down precipitously from the year before. Activision's net revenue for the quarter was $188 million, $53 million below the $241 million it took in during the same period in 2005. The shortcoming was partially due to the lackluster performance of X-Men: The Official Game (PC, PlayStation 2, Xbox, Xbox 360, GameCube, DS, Game Boy Advance), which went on sale mid-May in the face of almost universally negative reviews. The publisher's other major release for the quarter, the film tie-in Over the Hedge (PC, PS2, Xbox, GameCube, DS, GBA), received similarly poor marks from critics.

Several other factors contributed to Activision's mixed financial picture. One was the publisher's spring spending spree. In April, the company acquired the rights to make games based on the James Bond film series after EA let its license lapse. In May, it announced the purchase of indie shop Red Octane, maker of the award-winning PS2 headbanger-sim Guitar Hero. Shortly after that purchase was completed in June, Activision opened an office in South Korea, which has one of the highest numbers of gamers per capita in the world.

However, like every other major publisher, Activision is developing a number of games for the PlayStation 3 and Nintendo Wii, both of which will go on sale this fall. That means the company is spending a lot of money on two untested platforms without recouping any of its losses--a fact that chairman and CEO Robert Kotick freely acknowledged.

"While there is still uncertainty with respect to the opportunities next-generation consoles will provide this fiscal year, we remain confident about the long-term industry prospects and our ability to realize superior returns for our shareholders," said Kotick in a statement.

Indeed, Activision told shareholders to gird themselves for even bigger losses during the current quarter, which ends September 30. During that three months, the company now expects a loss of $0.13 per share on revenues of $130 million.

For its full 2007 fiscal year, which ends on April 30, 2007, Activision raised its outlook to $1.08 billion in net revenues. For its 2008 fiscal year, the company "expects net revenues to exceed $1.6 billion."

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Discussion

20 comments
coltACP
coltACP

Activision hasn't really being releasing much with promise in the console market recently-they have some good titles for PC and had a few on Xbox and 360 but most of their games have been film tie ins and poor the past year. I think only call of duty and quake were probably succesful for them. Oh and to Interstate 76-hell yes! i wouldn't mind a port to DS with a few tweaks and Wifi, and maybe even a vigilante 8 game if Luxoflux has any talent left.

rynmls
rynmls

great for activision cause xmen really sucks...

faridmon
faridmon

ok, when they rely on movie-tie games, you know something is wrong.

Hunger4mo
Hunger4mo

where can i find the complete list or top 10?

ewjim
ewjim

Activision is good company, so they can't take big losses! :D

wenbin09
wenbin09

sad to hear about x-men.. but the call of duty series is fantastic!!

VegetaMaelstrom
VegetaMaelstrom

If Activision continues to lose stock value then EA may just have to step in with a hostile takeover and get the Bond license back :twisted:. Wouldn't that shake up the gaming world?

HyperMetaDragon
HyperMetaDragon

Call Of Duty 3 will help them get up, but not as much as Call Of Duty 2.

gamefreaks365
gamefreaks365

I'm sure Ubisoft not being #2 has more to do with EA and Activision having quite a few annual franchises to fall back on (Madden, NBA Live, Fifa, Tiger Woods, FIFA and NFS for EA; CoD, Tony Hawk, etc. for Activision). If Ubisoft can leverage more franchises throughout the year, they may manage to make a dent in Activision's #2 spot.

DarknessOfFate1
DarknessOfFate1

hey LiquidZ08 they released interstae 82 too didnt they i havent played either tho

hemakm3
hemakm3

Call of Duty 3 would help

LiquidZ08
LiquidZ08

Its about time Activision brought back a true classic. Interstate 76 .. I can still remember the awesome sound tracks & cut scenses. I'd buy that game just for the sense of nostalgia.

SmashBrosLegend
SmashBrosLegend

sootybuttercup2 ^Ubisoft is based in France. I assume thats why it is not #2 in the US. Anyway this really sucks for Activision o yeah. thx,

mike_mgoblue
mike_mgoblue

Call of Duty 2: Game of the Year Edition for the Xbox 360 really helped Activision. I read that it was still selling very well for the Xbox 360. I can't wait for Call of Duty 3 for the Xbox 360.

adijan
adijan

Activision is a great company i have alot of their games and it totaly sucks for them.

sootybuttercup2
sootybuttercup2

^Ubisoft is based in France. I assume thats why it is not #2 in the US. Anyway this really sucks for Activision

SmashBrosLegend
SmashBrosLegend

that sucks for activision. i thought ubi was # 2 behind EA? oh well.

Jypson44
Jypson44

Nearly time to buy that stock, bwah-ha ha ha ha!