Activision Continues to Shine

It’s been a good year for video games and the holidays were especially good for game publisher Activision (ATVI). Much like a movie studio with two huge summer blockbusters in the theaters at the same time, Activision’s Guitar Hero and Call of Duty sequels powered the company to record results (thanks, in part, to strong November and December sales).

In what may be the company’s last earnings report before the completion of their merger with Vivendi Games, Activision reported stellar third quarter results. This is now the 16th consecutive year that sales are up for the company.

CEO Bobby Kotick said “broader audiences are responding to products like Guitar Hero, and we expect that the demographics for video games will continue to expand.” He also added in the conference call with analysts that the company, and game industry, are “taking mindshare away from traditional forms of entertainment like movies and television.”

For the quarter ended December 31st, Activision saw an 80% year over year rise in revenue to a total of $1.48b ($824.3b last year). Net income on the quarter nearly doubled from $142.8m (46c/share) to $272.2m, or 86 cents a share. The company had previously expected to earn 76 cents a share this quarter. Console related game sales, at $1.1b, accounted for the majority of the revenue.

For the 9 months so far reported this fiscal year net income is now $200.7m, triple last year’s $100.2 for the same period.

The strength of these numbers surprised even the company. In a statement, CEO Kotick said “the video game market growth exceeded even our own forecasts, and we believe the momentum will continue over the coming years.”

Adjusting to the stronger results, the company upgraded their forecasts for the third time this year. They are now forecasting Q4 revenue of $350m, a 25% increase over consensus expectations.

Other highlights from the release:

•Call of Duty 4: Modern Warfare was the most popular game in units worldwide for calendar 2007, selling more than seven million copies, and the #1 PC game in units and dollars in the U.S. and Europe for the quarter ended December 31, 2007, according to The NPD Group, Charttrack and Gfk.

•Guitar Hero III: Legends of Rock was the #1 title in dollars for the calendar year worldwide, according to The NPD Group, Charttrack and Gfk. In the U.S., Guitar Hero III: Legends of Rock was the #1 best-selling video game in units and dollars of all time in a single year. The Guitar Hero franchise also set an industry record by surpassing $1 billion in North American retail sales in just 26 months according to The NPD Group.

•Spider-Man 3 was the #1 movie-based video game in dollars worldwide for the calendar year, according The NPD Group, Charttrack and Gfk.

•For the calendar year, Activision was the #1 publisher on the next-generation consoles in North America, according to The NPD Group.

•For the quarter ended December 31, 2007, Activision was the #1 U.S. console and handheld publisher overall, according to The NPD Group.

Activision remains set to merge with Vivendi Games later this year. The waiting period for U.S. Hart Scoty Rodino review expired January 16 effectively clearing the deal in the U.S. E.U. antitrust clearance is still pending. More on the merger can be found here.