Activision posts increased revenues in Q3 results

Software publisher Activision has revealed its Q3 financial results, posting a revenue increase of 20 per cent but offering a revised outlook for the year as the next-generation hardware transition takes place.

Net revenue for the third fiscal quarter ended December 31st stood at USD 816.2 million (EURO 679.8 million), compared to USD 680.1 million (EURO 566.4 million) for the same period in 2005.

Activision chairman and CEO Robert Kotick commented: "Net revenues for the third quarter and first nine months of fiscal year 2006 were the highest in the company's history. According to NPD we were the number two overall software publisher in the U.S. and remain the number the number one market share publisher for the Xbox 360."

Like many other major publishers, the company's profits have been adversely affected by the transition to next-generation hardware and a generally soft market in both the US and Europe. Weaker than expected sales of a couple of Activision's key titles, notably Gun and True Crime: Streets of New York, have played a role in diminishing the profit margin, as have the continuing stock shortages of Microsoft's Xbox 360 console.

Net income for the quarter was posted at USD 67.9 million (EURO 56.6 million), compared to USD 97.3 million (EURO 81 million) for the same period a year earlier - although entirely non-performance related factors, such as a write-down of capitalised software on the firm's balance sheet and a massive USD 92 million increase in A/R Reserves, contributed heavily to that shortfall.

Activision's revised outlook for the fourth quarter and full fiscal year calls for net revenues of USD 125-135 million (EURO 104-112 million) and USD 1.405 billion (EURO 1.170 billion) respectively, based on a short-term continuation of soft market conditions and a slow transition between current and next-generation hardware.

"In the long term, we are planning for market growth that historically follows the introduction of new console hardware," Kotick stated. "To leverage this future growth and prepare for fiscal 2008, which we expect will be the biggest year in Activision's history, we will continue to focus on investment in our product development resources and intellectual property portfolio, growing our international operations and optimizing our worldwide cost structure and resource allocation."

Looking further ahead, Activision has continued the conservative theme reflected in the larger reserve and the software write-down with a revenue forecast of just in excess of USD 1 billion (EURO 833.6 million) for the 2007 fiscal year. Industry watchers fully expect the publisher to exceed these estimates.