Activision’s profit rocks on to beat of ‘Guitar Hero II’
Activision Inc. is jamming, thanks to “Guitar Hero II.”
The Santa Monica-based company swung to a quarterly profit Thursday on strong sales of its video game that lets players pretend to be rock stars. Activision bucked the recent trend of game publishers posting summertime losses.
“It was by far the strongest performance of any company in the industry this quarter,” said Evan Wilson, an analyst with Pacific Crest Securities.
Continuing the bumpy ride of Activision’s rivals, Take-Two Interactive Software Inc. said Thursday that it would delay the release of “Grand Theft Auto IV” by six months because of technical problems.
Activision reported a profit of $27.8 million, or 9 cents a share, for its fiscal first quarter, contrasted with a loss of $18.3 million, or 7 cents, a year earlier. Sales jumped 163% to $495.5 million.
The results beat Wall Street expectations. Analysts had expected the company to earn 7 cents a share on sales of $445.2 million, according to Thomson Financial.
Activision shares gained 87 cents, nearly 5%, to $18.30 in regular trading. They fell 20 cents after hours.
Take-Two’s “Grand Theft Auto IV” delay gave Activision some breathing room. Originally due in October, the title had been widely expected to be such a massive blockbuster that other publishers had timed the release of their games so as not to be eclipsed.
“So many companies were thinking about not being around the blast radius of GTA,” Activision Chief Executive Bobby Kotick said.
Wilson said the delay had “created pretty dramatic winners and losers.”
Among the losers were New York-based Take-Two, which shifted its full-year forecast from break-even to a loss of as much as $1.35 a share as a result of GTA slipping into the next fiscal year.
Sony Corp., which had relied on the game to lift sales of its PlayStation 3 console, also is expected to suffer.
Winners include Activision, THQ Inc., Electronic Arts Inc., Nintendo Co. and Microsoft Corp. -- companies that could see their game sales grow as game players fill the void created by the absence of “Grand Theft Auto” on store shelves during the holiday season.
“People who were saving up $60 to buy GTA are now going to buy something else,” said Michael Pachter, an analyst with Wedbush Morgan Securities. “It could be ‘Guitar Hero III.’ It could be ‘Call of Duty 4.’ ”
And that would be fine by Kotick, who over the years has pursued a growth strategy through a combination of home-grown franchises such as “Call of Duty,” licenses such as “Spider-Man” and acquisitions, including the purchase last year of Red Octane, the publisher of “Guitar Hero.”
“Activision did 30% of their quarterly revenue on ‘Guitar Hero II,’ ” Pachter said. “That’s roughly $150 million in revenue for a company that they purchased for $150 million. And they’re likely to have even bigger numbers this holiday when ‘Guitar Hero III’ comes out. That’s amazing.”
The company said its strong first quarter also was the result of strong sales of games based on movies, including “Spider-Man 3,” “Shrek the Third” and “Transformers: The Game.”
The titles sold well during a quarter in which publishers traditionally post weak results.
EA and THQ both posted quarterly losses and lower revenue Wednesday, squeezed by a light summer selling season and higher cost of developing games for powerful next-generation consoles.
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