Activision Reports Loss of $10 Million

Times Staff Writer

Saying it released relatively few titles its fiscal second quarter, video game publisher Activision Inc. on Thursday reported a 31% drop in revenue and a $10-million loss.

The loss of 11 cents a share came on sales of $117.5 million in the three months ended Sept. 30. A year ago, the Santa Monica-based company earned $9.1 million, or 8 cents, on sales of $169.2 million.

Activision's shares, which fell 17 cents Thursday to $14.96 on Nasdaq, fell as low as $14.32 in after-hours trading after the earnings announcement.

"We had a light release schedule for the second quarter," said Activision President Ron Doornink. "However, our main focus for this fiscal year remains on our third-quarter releases."

Doornink raised sales forecasts for the holiday quarter by $30 million, to $390 million.

The publisher of such games as "Tony Hawk's Underground" and "Call of Duty" said it canceled 10 games that were "unlikely to produce an acceptable level of return."

The company will take a one-time charge of $23 million, or 16 cents a share, in the third quarter to write off development costs already incurred.

Doornink projected a fiscal year profit of 34 cents a share, down from a previous forecast of 47 cents.

Like other game companies, Activision increasingly is putting bigger bets on fewer titles, pumping up development and marketing budgets for each game.

The strategy increases the company's exposure to the risk that a small number of bad bets could significantly swing the company's financial performance, Doornink acknowledged in a conference call with analysts.

"Games have become more expensive to develop and market," said P.J. McNealy, an analyst with American Technology Research in San Francisco. "To mitigate against the higher risk, companies are turning to big Hollywood licenses that will let them ride the movies' marketing coattails."

Next year, Activision's slate is expected to include games based on upcoming sequels to Sony Pictures Entertainment's "Spider-Man" and DreamWorks SKG's "Shrek," as well as a title based on "A Shark's Tale" from DreamWorks.

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