Activision Soars on U.S. Game Playing

Buoyed by the launch of new high-powered consoles, video game maker Activision on Tuesday boosted revenue and profit projections as consumers defy the sour economy and snap up games at a record clip.

The Santa Monica publisher of the “Tony Hawk” skateboarding series told Wall Street analysts that fiscal-year profit would be 46% greater than previously expected, rising to $42.3 million on sales of $725 million. That’s a 17% bump from previous revenue estimates of $680 million.

Shares rose $1.64 after the announcement to close at $27.20 on Nasdaq.

The November debuts of Microsoft Corp.’s Xbox and Nintendo Co.’s GameCube fueled a surge in interest in video games. In addition to Activision, publishers such as Electronic Arts Inc. have enjoyed improved sales as new consumers buy their first game machine.

Although sales of GameCube and Xbox games are expected to be no more than 6% of Activision’s revenue, the company said strong interest in games has helped spur sales for other platforms as well.

“We expected software sales to be flat to slightly down this year, and it has been better than we expected,” said Bobby Kotick, Activision’s chief executive. “The market is over-performing a little bit, and we are over-performing quite a bit.”

Sales of games are projected to grow 10% this year, said Michael P. Wallace, managing director at UBS Warburg in New York. “The industry is doing real well,” Wallace said. “You have three platforms--PlayStation 2, Xbox and GameCube--that are really clicking here. And Activision has got the right set of products for all three.”

Activision said it expects a profit of $49.3 million on revenue of $810 million in its next fiscal year, which begins April 1.

P.J. McNealy, senior analyst at Gartner, a technology research firm in San Jose, said most game companies are likely to prosper in the next two or three years as the industry draws more first-time consumers of video games. One in three U.S. households has a video game console.

Activision, the second-largest independent U.S. game publisher after Electronic Arts, has seen its stock nearly triple this year.