Activision loss widens but outlook improves
Activision Inc., the Santa Monica-based video-game publisher behind the “Guitar Hero” and “Tony Hawk” series, on Thursday posted higher fourth-quarter losses due in part to a costly internal inquiry into its stock-option accounting.
Its fiscal fourth-quarter revenue rose 66% to $313 million from the year-earlier period. But Activision posted a net loss of $14.4 million, or 5 cents a share. It had lost $9.1 million, or 3 cents, the same quarter last year.
Activision’s stock, which closed up 34 cents to $19.79, lost 27 cents in extended trading after the earnings release.
Despite higher quarterly revenue, its profit was squeezed by its distribution business, said Colin Sebastian, an analyst with Lazard Capital Markets. Activision makes less profit distributing other companies’ products, including Sony Corp.’s PlayStation 3 consoles in Europe, than it does selling its own games.
Activision attributed some of its quarterly loss to an internal investigation into the way it accounted for stock options from April 1993 to March 2006. Those costs are expected to hit this year’s first-quarter profit, as lawyers and accountants complete a review, said Thomas Tippl, Activision’s chief financial officer.
Other factors included the expense of creating games for the next generation of consoles and lingering costs from Activision’s 2006 acquisition of RedOctane Inc., the studio behind the “Guitar Hero” franchise.
For the full year, revenue rose to $1.51 billion from $1.47 billion in 2006. Activision Chief Executive Robert Kotick credited the growth to strong sales of “Guitar Hero II” and “Call of Duty 3.” Net income was $85.8 million, or 28 cents a share, compared with $40.3 million, or 14 cents a share, a year earlier.
For its fiscal first quarter, which ends in June, Activision projected earnings of 3 cents a share on $425 million in revenue. For the 2008 fiscal year, it said it expected to double its operating profit to 45 cents a share on sales of $1.8 billion.
