Activision Hits Record Q1 Sales, Guitar Hero 80s Gets Record Day-One Sales

Author: by Brandon Boyer, Jason Dobson

Activision has announced its first quarter results, showing sales up 163 percent to an all time record $459.5 million in sales driven by Guitar Hero II, Spider-Man 3 and Shrek The Third, leading to profits of $27.8 million. The profits are up from a $18.3 million loss in the first quarter of last year, with company chairman and CEO Robert Kotick boasting that the company "shipped more than eight million units of new game releases worldwide and for the first six months of the calendar year, Activision was the #1 third-party U.S. publisher on the console and handheld platforms." Along with chart-topping sales of Guitar Hero II, Spider-Man 3 and Shrek The Third, the company's first quarter also saw strong sales of its new IP, TRANSFORMERS: The Game, its international publishing revenues up 240% year over year, and the acquisition of middleware company DemonWare. For its second quarter, during which it has already released Guitar Hero Encore: Rocks The 80s and will soon release Enemy Territory: Quake Wars, Activision says it expects sales of $250 million. It has also increased its fiscal 2008 sales and profit guidance, with yearly sales estimated at $1.87 billion, up from previous gudiance of $1.8 billion in net revenues and earnings per diluted share. Said Kotick, “Our focus on growing our strong franchises and next- generation console leadership position is yielding superb results. We intend to continue expanding our franchise portfolio, strengthening our development capabilities and improving our operating efficiency over the balance of the fiscal year. We believe this strategy will create strengths and capabilities that should enable us to continue growing our revenues, operating margin and earnings per share, as well as increase our return on invested capital.” [UPDATE: In the company's earnings call, Kotick called the fiscal year as the “largest and most profitable” in company history. He also specifically spoke to the early retail performance of the recently shipped Guitar Hero Encore: Rock the 80s, which he noted had the “highest first day sell through in Activison history,” demonstrating the “tremendous growth potential” of the franchise. Activision also looks to build upon this momentum leading to the fall release of Guitar Hero III, with Kotick revealing plans for “over 30,000 in-store kiosks worldwide” dedicated to playable demos of the upcoming rhythm action game. This, according to the executive, represents “more than triple” the kiosks rolled out last year for the Guitar Hero II launch. He added that the company has also “significantly increased capacity” for guitar peripheral production to support the title's global demand, on top of plans to make available “internationally relevant music” for download, as well as tracks found on previous Guitar Hero releases. When asked about the eagerly anticipated debut of the Guitar Hero franchise for the Wii, the company refrained from giving any details, with Kotick saying simply that the company is “very, very excited about it,” and that “it's one of the products that takes full advantage of the capabilities of the Wii.” Finally, when approached regarding if Take Two's delay of Grand Theft Auto IV will have any effect on Activision's market outlook, a representative noted belief that Call of Duty 4 “is likely to be the number one product on the PS3,” but added that “it's a little early to figure out just yet... what this will do to our business in the quarter.” Executives also stated that the company is looking to possibly adjust its release dates “within a reasonable window of time” to take advantage of what now looks to be a gap in the fall quarter.]