Game maker’s profit doubles
Activision Blizzard Inc. reported a strong profit for its fiscal first quarter Thursday, in contrast to losses posted earlier this week by its video game industry rivals THQ Inc. and Electronic Arts Inc.
Santa Monica-based Activision said net income doubled to $59 million, or 18 cents a share. Sales rose 32% to $654.2 million on the strength of its Kung Fu Panda game and two new titles based on its Guitar Hero franchise.
Activision merged with Vivendi Games on July 9, but the reported financial results applied only to Activision because the quarter ended June 30.
Calabasas-based THQ, known for its WWE wrestling games, also saw sales rise 32%, to $137.6 million, in its fiscal first quarter reported Wednesday, but it posted a loss of $27.2 million, or 41 cents a share. That was wider than the loss of $9.3 million, or 14 cents a share, a year earlier.
Redwood City, Calif.-based EA said revenue more than doubled to $804 million, but it still recorded a loss of $95 million, or 30 cents a share. EA also disclosed that advance customer orders for its upcoming Madden Football game, a key franchise, had been lower than last year.
All three game companies projected losses for the current quarter, even though game software sales are poised to grow 24% this year, according to projections from Wedbush Morgan Securities.
If the video game business is doing so well, then why isn’t everyone swimming in profits?
“It’s a seasonal business,” said Michael Pachter, an analyst with Wedbush Morgan.
As much as three-quarters of the industry’s sales occur during the holidays. But companies still must pay overhead costs during quarters when they’re not releasing as many games, he said.
Activision’s projected loss this quarter will be exacerbated by the cost of consolidating with Vivendi’s game business. The combined company’s shares gained 20 cents in regular trading to $35.98 but fell 73 cents to $35.25 in after-hours trading after the earnings release.
In subsequent quarters, however, Activision expects to benefit from World of Warcraft, a Vivendi title with more than 10.9 million subscribers who pay monthly fees to play the online game.
“World of Warcraft has a steady revenue stream that will help smooth out earnings for Activision,” Pachter said.
The title will get a big boost this year when Vivendi’s Blizzard Entertainment releases World of Warcraft: Wrath of the Lich King.
Mike Morhaime, Blizzard’s chief executive, said the Irvine developer was working on a brand-new online game, as well as fresh installments of its Diablo and Starcraft franchises.
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