Activision Says Weak Sales Will Hurt Profit

Activision Inc. on Wednesday warned that its profit for the rest of this fiscal year would miss its previous target as a shift to a new generation of game consoles and weak consumer spending slowed sales for the video game publisher.

Activision shares slipped about 11% to $12.75 in extended trading after the Santa Monica company said it expected earnings to be “significantly lower” than previously expected in the quarter ending Dec. 31, when most video game publishers reap about half their annual sales.

The warning comes about a week after video game industry leader Electronic Arts Inc. signaled that sales were weak in the first part of December.

Video game sales have been soft in recent months as consumers waited and saved for new gaming consoles, starting with Microsoft Corp.’s Xbox 360 which debuted in North America on Nov. 22.

Activision said its fiscal fourth quarter ending in March also would be hit by slow sales. Its overall portfolio of products is not selling as well as anticipated, and orders for its most profitable titles may be weak, the company said.

Activision on Nov. 2 raised its net revenue outlook for the full 2006 fiscal year to $1.48 billion, and said it expected earnings per share of 52 cents.

At the same time, it backed its third-quarter revenue outlook of $790 million and said it expected per-share earnings of 52 cents. For the fourth quarter, it forecast net revenue of $226 million and earnings per share of 5 cents.

The company posted small net losses on a per-share basis in the first and second quarters of fiscal 2006.

Analysts, on average, had seen Activision posting third-quarter net income of 52 cents a share on revenue of $788.6 million.

Activision shares rose 72 cents to $14.30 before the announcement.