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Activision Announces Second Quarter 2006 Results

Company's Q2 Results Exceed Outlook - - Company Increases FY 2006 Revenue Outlook

SANTA MONICA, Calif., Nov 02, 2005 -- Activision, Inc. (Nasdaq: ATVI) today announced financial results for the second fiscal quarter ended September 30, 2005.

Net revenues were $222.5 million, an increase of $22.5 million from the company's prior outlook of $200 million. Net revenues for the second quarter of last fiscal year were $310.6 million. Net loss for the second fiscal quarter was $13.2 million, as compared with a net income for the second fiscal quarter last year of $25.5 million. Loss per share was $0.05, which is $0.02 better than the company's prior outlook of a loss per share of $0.07, as compared with earnings per diluted share of $0.09 reported for the same period last year.

Net revenues for the six-month period ended September 30, 2005, were $463.6 million, as compared to net revenues of $521.9 million reported for the six-month period of last fiscal year. Net loss for the six-month period was $16.8 million, or a loss per share of $0.06, as compared with net income of $37.5 million, or earnings per diluted share of $0.14, reported for the same period last year.

Robert A. Kotick, Chairman and CEO of Activision, stated, "Our second quarter revenues and earnings exceeded our expectations, despite having difficult year-over-year comparables. To date, seven of our games have shipped more than one million units each. We remain focused on big propositions and in the third quarter will release the strongest holiday slate in our history. We are optimistic about our holiday titles, although we remain cautious of the many variables that can affect the holiday selling season and our own performance. As we look toward the future, we will continue to leverage our expanding portfolio of franchises and world class development capabilities to strengthen our global competitive position."

Kotick continued, "We are excited about the long-term opportunities that will result from the next-generation consoles and handheld platforms. These new platforms combined with the ever increasing installed base of current- generation console hardware and our strong portfolio of brands should enable us to continue to take advantage of the positive market fundamentals over the long-term."

Business Highlights

Activision's second quarter results were driven by sales of Ultimate Spider-ManTM for the PlayStation® 2 computer entertainment system, Xbox® video game system from Microsoft, Nintendo® Game Cube., Nintendo Game Boy® Advance, Nintendo® DSTM video game platforms and the PC; and X-Men Legends II: Rise of Apocalypse and World Series of Poker for the PlayStation® 2 computer entertainment system, Xbox® video game system from Microsoft, Nintendo® Game CubeTM, the PC and the PlayStation® Portable Entertainment Platforms (PSPTM). The company also released Tony Hawk's Underground 2 Remix and Spider-Man 2TM in conjunction with the European launch of the PSP hardware.

Other highlights include:

  • On September 12, 2005, Activision announced the appointment of Thomas Tippl as Chief Financial Officer and Director of Activision Publishing, Inc. A 14-year veteran of Procter & Gamble, Tippl has held leadership positions in investor relations, global treasury, financial and strategic planning, acquisitions and divestitures and financial management of business units in Asia, Europe and North America.
  • During the second quarter, Activision's Board of Directors approved a four-for-three split of its common shares. The split was announced on September 28, 2005 and was paid on October 24, 2005 to shareholders of record as of the close of business on October 10, 2005.

Activision's third quarter slate will be driven primarily by proven franchises which include Tony Hawk's American WastelandTM for the PlayStation 2 computer entertainment system, Xbox video game system, the soon- to-be released Xbox 360TM video game and entertainment system, Nintendo GameCube, Nintendo Game Boy Advance and the Nintendo DS; Call of Duty 2TM and Quake 4TM for the PC and Xbox 360 video game and entertainment system; Call of Duty 2: Big Red OneTM and True Crime: New York CityTM for the PlayStation 2 computer entertainment system, Xbox video game system and Nintendo GameCube; and Shrek® SuperSlam for the PlayStation 2 computer entertainment system, Xbox video game system, Nintendo GameCube, Nintendo Game Boy Advance and the Nintendo DS. Additionally, the company will introduce two new intellectual properties GUNTM, from our internal studio Neversoft, which is being developed for the PlayStation 2 computer entertainment system, Xbox video game system, Xbox 360TM video game and entertainment system, Nintendo GameCube, and the PC; and The MoviesTM for the PC.

Kotick continued, "Our ability to release our largest holiday slate in the company's history -- eight big propositions -- prior to Thanksgiving is a testament to our extraordinarily talented employees' dedication, innovation, passion and commitment, as well as our organization's institutionalized product development processes which enable us to manage a large portfolio of global products while providing consistency with launch dates and product quality."

Company Outlook

For the full fiscal year, Activision raised its net revenue outlook to $1.48 billion, and expects earnings per diluted share of $0.52.

The company reconfirmed its net revenue outlook for the third quarter and expects net revenues of $790 million and earnings per diluted share of $0.52. For the fourth quarter, Activision expects net revenues of $226 million and earnings per diluted share of $0.05.

Conference Call

Today at 4:30 p.m. EST, Activision's management will host a conference call and webcast to discuss its second quarter fiscal year 2006 results and outlook. The company welcomes all members of the financial and media communities to visit the "Investor Relations" area of www.activision.com to listen to the conference call via live webcast or to listen to the call live by dialing into (913) 981-4902 in the U.S.

About Activision

Headquartered in Santa Monica, California, Activision, Inc. is a leading worldwide developer, publisher and distributor of interactive entertainment and leisure products. Founded in 1979, Activision posted net revenues of $1.4 billion for the fiscal year ended March 31, 2005.

Activision maintains operations in the U.S., Canada, the United Kingdom, France, Germany, Italy, Spain, Japan, Australia, Scandinavia and the Netherlands. More information about Activision and its products can be found on the company's World Wide Web site, which is located at www.activision.com.

Note: The statements made in this press release that are not historical facts are "forward-looking" statements. These forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties. The company cautions readers of this press release that a number of important factors could cause Activision's actual future results to differ materially from those expressed in any such forward-looking statements.

Such factors include, without limitation, product delays, retail acceptance of our products, industry competition, rapid changes in technology and industry standards, protection of proprietary rights, maintenance of relationships with key personnel, vendors and third-party developers, international economic and political conditions, integration of recently acquired subsidiaries and identification of suitable future acquisition opportunities. These important factors and other factors that potentially could affect the company's financial results are described in our filings with the Securities and Exchange Commission, including the company's most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Readers of this press release are referred to such filings. The company may change its intention, belief or expectation, at any time and without notice, based upon any changes in such factors, in the company's assumptions or otherwise. The company undertakes no obligation to release publicly any revisions to its forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

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