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Activision beats estimates with incredibly strong Q3 results

Publisher Activision has announced unexpectedly high revenues for the holiday quarter, with titles such as Spider-Man 2 and Tony Hawks Underground 2 driving $680 million in sales, up 34 per cent year on year.

Publisher Activision has announced unexpectedly high revenues for the holiday quarter, with titles such as Spider-Man 2 and Tony Hawks Underground 2 driving $680 million in sales, up 34 per cent year on year.

The results beat expectations from most analysts, and saw Activision actually beating its entire FY2004 financial year in the first nine months of FY2005 - with revenues of $1.2 billion generated in the three quarters leading up to December 31st.

Profits were also up for the company, with the third quarter seeing a 26 per cent year on year jump in profit to $97.3 million, and the firm's full year revenue outlook has been lifted to $1.352 billion.

Call of Duty and Tony Hawks Underground 2 were the two big sellers of the quarter, but catalogue sales of Spider-Man 2 and Shrek 2 also made a major positive contribution to the publisher's financials.

Expectations for the FY2006 period have also been lifted, with the company hoping to see 12 games breaking the million unit sales mark - compared to ten in 2005 - with five to six of them selling over two million units.

The first quarter of FY2006 is expected to start off strong thanks to sales of Doom 3 on Xbox and the Doom 3 mission pack on PC, both of which have been pushed back from their previously announced launch in calendar Q1.

The company's executives expect to see major growth on the new handheld platforms through FY2006, with the PC and console business remaining flat through that period before the new consoles start to make an impact in FY2007.

However, Activision is ready for an Xbox 2 launch in Autumn 2005, with CEO Ron Doornink telling investors on a conference call that "it will be our goal to put out enough titles so we have a significant, meaningful presence at launch."

Analysts welcomed Activision's results, with Banc of America Securities' Gary Cooper describing the figures as "solid" and restating a Buy rating on the stock, while noting that the publisher's prospects for FY2006 now look stronger than previously expected.

"It was only two years ago that many observers wrote off Activision as a 'one hit wonder'," Cooper commented. "Since those dark days of the fall of 2002, Activision has built upon its foundation of Tony Hawk titles to create a diverse portfolio of licensed and owned intellectual properties."

He praised Activision's work on expanding its operating margins, nothing that firm's margins have seen "solid improvement" in the past several years while leading competitor EA has seen its own margins stagnating.

Wedbush Morgan Securities analyst Michael Pachter also praised the company's results, restating a Buy rating on ATVI stock and commenting that "Activision is well on its way to replicating the success enjoyed by Electronic Arts" and has a line-up for the coming year which is "among the strongest in the industry."

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Rob Fahey avatar

Rob Fahey

Contributing Editor

Rob Fahey is a former editor of GamesIndustry.biz who spent several years living in Japan and probably still has a mint condition Dreamcast Samba de Amigo set.

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