Activision raises guidance on PS3 hopes

Two weeks after Activision first issued a preliminary earnings report announcing it had a record holiday season, it has increased guidance for the current quarter. On January 25, Activision predicted it would take in $170 million in revenue during the January to March 2007 quarter, the fourth in its 2007 fiscal year. Today, the company increased that number to $200 million.

Speaking to analysts in a conference call, Activision CFO Thomas Tippl said that "better visibility regarding the allocation of PlayStation 3 hardware" was the main reason for the revision. Later, Tippl expanded on that statement, saying Activision had received "more specific information...from Sony on how their units are going to break out" for the console's March 2007 launch in Europe. "We have reflected that in our updated guidance," he said.

But while $200 million is a solid figure for a traditionally slow time, it was just a fraction of Activision's record-setting haul during the October to December 2006 quarter. By the company's estimates, it racked up $822.8 million between October 1 and December 31, 2006, besting the $816.2 million in revenue during the same quarter in 2005. It expects quarterly net income--that is, profit--to rise some 84 percent year on year, going from $67.9 million to $124.8 million. The figures remain preliminary pending an investigation into Activision's stock-option-grant practices.

In a conference call with analysts, Activision Publishing president and CEO Mike Griffith showered praise on his company's bread-and-butter franchises, Call of Duty and Tony Hawk. According to NPD, Call of Duty 3 racked up more than $85.8 million in US sales from its release in November until the end of the year. Activision said it also took in more than $10 million from international sales of Call of Duty 2 map packs on Xbox Live Marketplace during the quarter.

US 2006 sales of Tony Hawk's Project 8 exceeded $43.9 million, while Tony Hawk's Downhill Jam eked out just over $9 million. Despite the latter's lackluster numbers, Activision also announced it was porting the game to the PlayStation 2 during the April to June 2007 quarter.

Above all, though, Griffith singled out Guitar Hero II for particular praise. Despite only being released on one platform--the PS2--the game headbanged out more than $93.6 million in the US alone in 2006, according to NPD. Griffith credited the game's success to an extensive publicity campaign, which includes some 7,500 demo kiosks, and better-than-expected sales of the PS2.

"The PS2's success certainly benefited Guitar Hero and, you know, some would say Guitar Hero maybe benefited the PlayStation 2 platform as well," he said. Griffith also said he expects the PS2 to have surprising longevity. "If you look back at the PSone, when they got down to that $79 price point that year they sold 2.5 million units and there's a long way to go still on the PS2's price point."

Griffith also gave his company's predictions on how the 2007 console race will shape up. Activision's current estimates peg the Xbox 360 as selling 5 million units in North American during the calendar year. The publisher has the Wii, PS2, and PS3 tied at 4 million apiece. The company also said it expects "10 million handhelds" to be bought on the continent during the next 12 months, though no platform was specified. Activision also expects the $59 price carried by most third-party PS3 and 360 games to hold, as will the $49 sticker slapped on Wii games.

For the company's 2008 fiscal year, which begins on April 1, Griffith said Activision will have 60 individual products, or SKUs, which would "aggressively target the Nintendo platforms." He said the company "will be focusing on our most successful franchises--Call of Duty, Tony Hawk, and Guitar Hero," though he stopped short of announcing specific new titles. Griffith did, however, say that Guitar Hero titles are coming to the Wii and DS.

The first quarter of Activision's FY2008 has 360 Guitar Hero II and Call of Duty: Roads of Victory scheduled to ship. It is also the tentative launch window of the long-in-the-making PC shooter Quake Wars: Enemy Territory. Finally, the quarter will see the release of a wide spread of cross-platform games based on three films: Spider-Man 3, Transformers, and Shrek the Third.