By Scott Hillis
SAN FRANCISCO, May 8 (Reuters) - Activision Inc (ATVI.O)posted a quarterly profit on Thursday that blew pastexpectations as demand for its "Guitar Hero 3" and "Call ofDuty 4" video games made up for a complete lack of newreleases.
The two games, released late last year, drove Activision toa profit, excluding stock-based compensation costs, of justunder $55 million, or 17 cents per share, more than triple theaverage expectation of 5 cents among Wall Street analysts onReuters Estimates.
Revenue was $602.5 million, towering 93 percent above ayear ago and burying the average estimate of $373.6 million.
"It's the ongoing popularity of 'Guitar Hero' and 'Call ofDuty'. It just shows what can happen in terms of performancewhen you have blockbuster hit titles," said Colin Sebastian, ananalyst with Lazard Capital Markets.
Shares of Activision rose 3.9 percent to $28.78 in extendedtrade from a close of $27.70 on Nasdaq, where they had gainedless than 1 percent in the regular session.
Activision's results were the latest piece of evidence thatthe video game industry is shrugging off the concerns about thebroader economy weighing on other sectors.
"The video-game market fundamentals have never beenstronger. There's no evidence that this growth will slow,"Chief Executive Bobby Kotick told a conference call.
Activision's results came the day after rival Take-TwoInteractive Software Inc (TTWO.O) said its criminal action game"Grand Theft Auto 4" had pulled in $500 million in revenue inits first week, making it one of the biggest entertainmentlaunches ever.
"I think it's all about the games and if companies put outdifferentiated premium games then the gamers will scoop themup," said Signal Hill analyst Todd Greenwald. "It's asrecession-proof as any business can be."
Activision also said that for its current first quarter, itexpected earnings of 13 cents per share, excluding specialitems, on revenue of $500 million. Wall Street analysts, onaverage, have forecast 13 cents per share on revenue of $493million.
Those forecasts do not include results from the games unitof France's Vivendi (VIV.PA), the maker of the popular "Worldof Warcraft" game that is merging with Activision in a dealexpected to close by the middle of the year.
Activision plans three new "Guitar Hero" titles in 2008:one for Nintendo Co Ltd's (7974.OS) DS handheld device, anedition focusing on U.S. rock group Aerosmith, and a productahead of the holidays that many speculate will feature moreinstruments like drums.
A key focus this year will be Europe, where the company istrying to whip up the same excitement for the "Guitar Hero"franchise that it enjoyed in the United States, Kotick said.
"Where we started seeing the market for 'Guitar Hero'explode in North America, we're probably a year behind inEurope," Kotick told Reuters.
Article Source: www.reuters.com.
