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Activision Reports Record Net Revenues for Fiscal 2007

Company Expects FY 2008 Net Revenue Growth of 19% to Record $1.8 Billion - - Company Anticipates FY 2008 Operating Income to More than Double

SANTA MONICA, Calif., May 31, 2007 -- Activision, Inc. (Nasdaq:ATVI) today announced record net revenues for the fiscal year ended March 31, 2007.

Net revenues for the fiscal year ended March 31, 2007 were $1.51 billion, as compared to $1.47 billion for the fiscal year ended March 31, 2006. Net income for the fiscal year was $85.8 million, or $0.28 per diluted share, as compared to net income of $40.3 million, or $0.14 per diluted share reported for the last fiscal year. Excluding the impact of expenses relating to equity-based compensation, the company reported earnings per diluted share of $0.33 for the fiscal year. This compares to the company's previous outlook of $0.26 per share excluding equity-based compensation expense.

Net revenues for the fourth quarter ended March 31, 2007 were $313 million, as compared to $188 million that the company reported for the fourth quarter of the last fiscal year. For the fourth quarter, the company reported a net loss of $14.4 million, or a loss per share of $0.05, as compared to a net loss of $9.1 million, or a loss per share of $0.03 for the fiscal year 2006 fourth quarter. Excluding equity-based compensation expense, the company reported a loss per share of $0.04 for the fourth quarter.

Additionally, the company has updated its preliminary financial results for the nine months ended December 31, 2006. The company's previous preliminary earnings per diluted share estimate for the nine months ended December 31, 2006 was $0.30 including equity-based compensation expense. Excluding the impact of equity-based compensation expense, the company's previous preliminary earnings per diluted share for the nine months were $0.33.

As a result of updating its financial statements for charges related to its review of historical stock option practices, and subsequent events adjustments primarily related to a change in the company's effective tax rate, the company's updated nine month earnings per diluted share, including equity-based compensation expense, increased to $0.33. Excluding the impact of equity-based compensation expense, the company's updated nine month earnings per diluted share were $0.37.

Robert Kotick, Chairman and CEO of Activision, Inc., commented, "Activision's fiscal year 2007 net revenues, which were the highest in the company's history, totaled $1.5 billion, marking 15 consecutive years of revenue growth. We delivered solid results for the fourth quarter driven by the success of Guitar Hero II TM and Call of Duty ® 3, as well as better than expected performance of the company's distribution business. Our balance sheet remains one of the strongest in the industry with nearly $1 billion in cash and short-term investments and $1.4 billion in shareholders' equity.

"We expect fiscal 2008 to be our largest and most profitable year ever. The combination of our first quarter slate and superb release schedule for the balance of the year, Guitar Hero's rapid rise as a popular cultural phenomenon and our solid leadership position on all of the major gaming platforms, should provide us with a competitive advantage as we enter the growth phase of the new hardware cycle. We remain focused on expanding operating margins by growing our balanced franchise portfolio, increasing our international publishing capabilities and continuing to improve operational efficiencies worldwide," Kotick added.

Business Highlights

Activision's fiscal year results were driven by strong worldwide consumer response to Call of Duty 3, Marvel TM : Ultimate Alliance TM , Tony Hawk's Project 8 TM and Guitar Hero II, as well as the strength of its distribution business. During the fiscal year, the company grew its U.S. console market share, was the #2 U.S. third-party software publisher overall, and had two top-10 best-selling titles overall in the U.S., Call of Duty 3 and Guitar Hero II, according to The NPD Group.

During the fiscal year, Activision successfully integrated RedOctane into its business and expanded the Guitar Hero franchise globally. According to The NPD Group, in the U.S. Guitar Hero II was the #2 best-selling franchise overall and the #1 best-selling franchise on the PlayStation ® 2 computer entertainment system.

During the fourth quarter, Activision released three titles for the PLAYSTATION 3 in Europe - Tony Hawk's Project 8, Call of Duty 3 and Marvel Ultimate Alliance as well as Call of Duty: Roads to Victory TM for the PSP worldwide.

Other business highlights are as follows:

-- During the fiscal year, Activision was the only U.S. publisher to rank as a top three publisher for both the recently released Wii and PLAYSTATION 3, according to The NPD Group.

-- According to The NPD Group, Call of Duty 3 ended the fiscal year as the #3 best-selling game in the U.S. on the Xbox 360.

-- On May 11, 2007, Activision completed its acquisition of DemonWare, the leading provider of network middleware technologies for console and PC games headquartered in Dublin, Ireland.

-- On June 6, 2006, Activision acquired video game publisher RedOctane, Inc. the publisher of the popular Guitar Hero franchise.

-- On May 3, 2006, Activision announced that MGM Interactive and EON Productions Ltd. awarded the company the rights to develop and publish interactive entertainment games based on the James Bond license through 2014.

For the first quarter of fiscal 2008, Activision has already released Guitar Hero II for the Xbox 360, as well as games based on Sony Pictures Entertainment's Columbia Pictures and Marvel Studios' "Spider-Man 3 TM ," and DreamWorks Animation's "Shrek the Third TM ." At the end of June, the company will release TRANSFORMERS: The Game in the U.S., which is based on DreamWorks Pictures' and Paramount Pictures' upcoming feature film that opens theatrically in North America on July 4, 2007. The company will release TRANSFORMERS: The Game internationally in the second quarter concurrent with the theatrical release.

Company Outlook

For fiscal 2008, Activision increased its net revenues outlook to $1.8 billion. Additionally, the company expects operating income to grow in excess of 100% over fiscal 2007. The company also expects earnings per diluted share of $0.45, including the impact of equity-based compensation expense. Excluding the impact of equity-based compensation expense, the company expects earnings per diluted share of $0.55.

For the first quarter of the fiscal year 2008, the company expects net revenues of $425 million and earnings per diluted share of $0.03, including the impact of equity-based compensation expense. The company's earnings per diluted share outlook for the first quarter excluding the impact of equity-based compensation expense is expected to be $0.05. The company expects that its first quarter outlook will be impacted by legal expenses and professional fees relating primarily to its internal review of historical stock option practices, including the completion of restatement-related filings and Nasdaq proceedings, matters relating to the pending informal SEC inquiry and defense of the pending derivative litigation. The company also announced that it would move the release of Enemy Territory TM : Quake Wars into the second quarter.

Stock Option Review and Restatement

On Friday, May 25, 2007, Activision filed an amended annual report on Form 10-K/A for the fiscal year ended March 31, 2006. Consistent with the estimate released by Activision on May 3, 2007, the Form 10-K/A reports a total of approximately $66.7 million in additional pre-tax ($45.4 million after-tax) non-cash equity-based compensation expense as a result of the stock option inquiry over the thirteen year period from April 1, 1993 through March 31, 2006. All but $2.6 million of the additional pre-tax non-cash equity-based compensation expense relates to periods prior to fiscal year 2006, and eighty percent of the additional pre-tax non-cash equity-based compensation expense relates to periods prior to April 1, 2003. In addition, Activision will report $0.6 million in additional pre-tax non-cash equity-based compensation expense during the quarter ended June 30, 2006.

Activision expects that it will shortly be in a position to file an amended quarterly report on Form 10-Q/A for the quarter ended June 30, 2006 and quarterly reports on Form 10-Q for the quarters ended September 30 and December 31, 2006. The completion of these filings will bring the company current in its periodic reporting obligations and will restore the company's compliance with Nasdaq listing requirements.

The company also intends to file its annual report on Form 10-K for the fiscal year ended March 31, 2007 on or before June 14, 2007, and to that end has filed for an automatic 15-day extension of the deadline for that filing to June 14, 2007.

The foregoing summary is qualified in its entirety by, and investors are urged to carefully read, the Form 10-K/A for the fiscal year ended March 31, 2006 that was filed last week.

Conference Call

Today at 4:30 p.m. EDT, Activision's management will host a conference call and Webcast to discuss its fiscal 2007 year-end results and outlook for fiscal 2008. 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 a live Webcast or to listen to the call live by dialing in at (719) 457-2637 in the U.S.

Non-GAAP Financial Measures

Activision provides net earnings (loss) per share data excluding the impact of expenses related to stock options, employee stock purchase plans, restricted stock awards and other share-based compensation and the associated tax benefits.

Prior to April 1, 2006, Activision accounted for equity-based compensation under Accounting Principles Board, Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB No. 25"). In accordance with APB No. 25 the company historically used the intrinsic value method to account for equity-based compensation. As of April 1, 2006, the company accounts for equity-based compensation using the fair value method under Statement of Financial Accounting Standards No. 123 (revised 2004), "Share Based Payment" ("FAS 123R").

This financial measure is not determined in accordance with generally accepted accounting principles (GAAP), and the exclusion of those amounts has the effect of increasing non-GAAP earnings per share by that same amount per share as compared to GAAP earnings per share for the period. Activision recognizes that there are limitations associated with the use of this non-GAAP financial measure as it does not reflect all of the expenses associated with our results as determined in accordance with GAAP and may reduce comparability to other companies that calculate similar non-GAAP measures differently.

Management compensates for the limitations resulting from the exclusion of expenses related to stock-based compensation by considering the amount and impact of equity-based compensation expenses separately and by considering the company's GAAP as well as non-GAAP results and, in this release, by presenting the most comparable GAAP measure, net income (loss), directly ahead of non-GAAP net income (loss) in this release and by providing a reconciliation that shows and describes the adjustments made in the accompanying tables. Management does not believe the limitations resulting from this exclusion are material, particularly when this non-GAAP financial measure is disclosed with its most comparable GAAP financial measure, net income (loss).

Management believes that the presentation of this non-GAAP financial measure provides investors with additional useful information to measure the company's financial performance because it allows for a better comparison of results in the periods reported herein to those in historical periods. This non-GAAP financial measure should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with GAAP. Non-GAAP net earnings (loss) do not include certain expenses required to be recorded in order to present earnings in accordance with GAAP. This non-GAAP financial measure is not based on a comprehensive set of accounting rules or principles and the term non-GAAP net earnings (loss) does not have a standardized meaning. Therefore, other companies may use the same or similarly named measure but exclude different items, which may not provide investors a comparable view of the company's performance in relation to other companies in the same industry.

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 $1.5 billion for the fiscal year ended March 31, 2007.

Activision maintains operations in the U.S., Canada, the United Kingdom, France, Germany, Ireland, Italy, Scandinavia, Spain, the Netherlands, Australia, Japan and South Korea. 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.

Cautionary Note Regarding Forward-looking Statements: Information in this press release that involves Activision's expectations, plans, intentions or strategies regarding the future are forward-looking statements that are not facts and involve a number of risks and uncertainties. In this release they are identified by references to dates after the date of this release and words such as "will," "will be," "remains," "to be," "plans," "believes", "may", "expects," "intends," and similar expressions. These risks and uncertainties include, but are not limited to, further action by the Nasdaq Listing and Hearing Review Council relating to the continuation of the listing of Activision's common stock on the Nasdaq market; the completion of work by Activision management and Activision's auditors on the restatement of Activision's financial statements in response to the findings of the special sub-committee of independent directors established in July 2006 to review our historical stock option granting practices; the completion and filing of overdue quarterly reports and amendments to a previously filed quarterly report with the SEC; the further implementation, acceptance and effectiveness of the remedial measures recommended or adopted by the sub-committee, the board and the Activision; the outcome of the informal inquiry opened by the SEC in July 2006 and the derivative litigation filed in July 2006 against certain current and former directors and officers of the Activision relating to the Activision's stock option granting practices, and the possibility that additional claims and proceedings will be commenced, including additional stockholder litigation, employee litigation, and additional action by the SEC and/or other regulatory agencies. Other factors that could cause the Activision's actual future results to differ materially from those expressed in the forward-looking statements set forth in this release include, without limitation, other litigation (unrelated to stock option granting practices), sales of the Activision's titles, shifts in consumer spending trends, the seasonal and cyclical nature of the interactive game market, the Activision's ability to predict consumer preferences among competing hardware platforms (including next-generation hardware), declines in software pricing, product returns and price protection, product delays, retail acceptance of the Activision's products, adoption rate and availability of new hardware and related software, industry competition, rapid changes in technology and industry standards, protection of proprietary rights, maintenance of relationships with key personnel, customers, vendors and third-party developers, international economic and political conditions, integration of recently acquired subsidiaries and identification of suitable future acquisition opportunities, limitations on our ability to issue stock and options, foreign exchange rate changes, and the risks identified in the Activision's most recent annual report on Form 10-K/A and recent reports on Form 8-K. The forward-looking statements in this release are based upon information available to the Activision as of the date of this release, and the Activision assumes no obligations to update any such forward-looking statement. Forward-looking statements believed to be true when made may ultimately prove to be incorrect. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and may cause actual results to differ materially from our current expectations.

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