Activision takes backdating charge
Activision Inc., publisher of the “Guitar Hero” and “Tony Hawk” series of video games, said Thursday that it would take a $67-million charge to account for 13 years’ worth of improperly dated stock options.
Analysts said the one-time charge should bring an end to concerns regarding executive stock options that have dogged the Santa Monica company since it launched a review of its compensation practices in July.
“They’ve been mired in this review for several quarters,” said Colin Sebastian, an analyst with Lazard Capital Markets. “This should help remove the uncertainty so they can focus on their core business.”
In March, Activision said an internal investigation had cleared its chief executive, Robert Kotick, of wrongdoing. But the special committee of the board that looked into the matter found that the former heads of the company’s human resources, finance and legal departments bore responsibility for the dating of stock options granted.
The company also has been under an informal inquiry by the Securities and Exchange Commission.
Investors pushed shares of Activision up 12 cents to $20.97. The stock has surged 32% in the last six months, driven largely by strong demand for its games. By contrast, shares of rival Electronic Arts Inc. have declined nearly 13.5% in the same period.
Activision said that revenue for its fiscal fourth quarter that ended March 31 jumped 66% to $313 million, thanks to brisk sales of “Guitar Hero II” and “Call of Duty 3.” It did not disclose its net profit and has not yet scheduled its full earnings report for the quarter.
Activision also said it expected to report fiscal 2007 revenue of more than $1.5 billion, compared with $1.47 billion the previous year. Kotick called that “the highest in Activision’s history.”
The company also reaffirmed that revenue would exceed $1.6 billion during the 2008 fiscal year, but many analysts had expected more than that.
“They generated $1.51 billion in fiscal 2007 and have essentially the same lineup in fiscal 2008, plus ‘Spider-Man,’ ‘Shrek,’ ‘Transformers’ and a lot more ‘Guitar Hero,’ ” said Michael Pachter, an analyst with Wedbush Morgan Securities. “So their revenue guidance sounds a little low to me.”
