Activision's profit soars on strong game sales

Video game publisher Activision Inc announced Thursday that its fiscal third-quarter profit soared, citing record breaking performance of Call of Duty 4: Modern Warfare and Guitar Hero III: Legends of Rock.

Activision, which is set to become world’s largest video game company with its pending merger with the games unit of French telecoms and media giant Vivendi, posted a higher-than-expected profit for the quarter ended Dec. 31.

The Santa Monica, California-based leading designer, publisher, and distributor of interactive entertainment software, Activision said it earned $272.2 million, or 86 cents per share, growing 90% from a profit of $142.8 million, or 46 cents per share, in the same period a year earlier.

Excluding special items such as stock-based compensation, the company earned $284.9 million or 90 cents per share, surpassing the Wall Street target of 81 cents, and Thomson Financial’s expected profit of 80 cents per share, excluding items.

Revenue for the quarter soared 80% to $1.48 billion from $824.3 million the year prior, beating Wall Street's estimate of $1.36 billion.

Activision also issued a better-than-expected sales forecast for the current fiscal quarter ending in March. The company expects sales of $350 million with earnings per share, excluding stock-options charges, of 4 cents a share for the fourth fiscal period, and expects sales of $2.65 for its full fiscal 2008 year, up from its earlier forecast of $2.45 billion.

Analysts predict revenue of $279.6 million with earnings of 4 cents a share for the period.

Activision said strong sales of "Call of Duty 4: Modern Warfare" and "Guitar Hero III: Legends of Rock" gave a significant boost to the quarter's results. A more aggressive roll-out of "Guitar Hero 3" in Europe this year will help sustain growth, it added.

"Broader audiences are responding to products like Guitar Hero, and we expect that the demographics for videogames will continue to expand," said Chairman and Chief Executive Robert Kotick in a statement.

"Guitar Hero 3" is the latest installment in the wildly popular franchise “Guitar Hero” in which players strum guitar-shaped controllers in time with rock songs playing on-screen. Guitar Hero franchisee was one of the best-selling games last year, which racked up $820 million in U.S. retail sales between its various Guitar Hero 2 and Guitar Hero III games. That's the most any franchise has ever made in one year. Overall, software sales hit $8.64 billion for 2007, a 34% increase over 2006.

Although the company is banking on games tied to upcoming films like DreamWorks’ "Kung Fu Panda" and a new James Bond title from Sony Corp, but, Kotick said 'Guitar Hero 3' will likely be the most important this year.