Activision lowers previous revenue and profit forecasts

Despite a positive reception to its first batch of next generation console titles, videogame publisher Activision has issued a formal statement, lowering the previous financial estimates for the full fiscal year 2006.

"Even though we have not yet completed the quarter and there is still uncertainty as the holiday season unfolds, we wanted to provide an update with regard to market conditions and the performance of our portfolio of products as a whole, " stated Michael Griffith, Activision president and CEO.

"For the quarter, we still expect to generate significant revenues; however, we are disappointed that our earnings performance will come in substantially below our previous outlook."

Activision posted its six-monthly results at the beginning of November, showing lower revenues than the same period in 2004, but significantly reduced operating losses. The release schedule was heavily weighted towards the final half of the year, to coincide with the holiday period, and the company had initially forecast net revenues of USD 790 million for the fourth quarter and USD1.48 billion for the full fiscal year.

Citing poor market conditions as the games industry continues its transition to next generation hardware, combined with lower than expected sales for several key brand releases, Activision expects to post its full third quarter results at the start of January, 2006.

Sales during October and November were down 20 per cent, and December sales, in spite of a significant adoption of its new Xbox 360 titles such as Call of Duty 2 and Gun, are currently much lower than initial expectations.

According to Activision, "The weakness in the U.S. and European markets is believed to be driven by an accelerated shift in consumer demand away from current generation hardware and software due to the introduction of new hardware as well as declines in consumer spending."

"The midterm market conditions will continue to pose challenges, but we believe we are well positioned to benefit from the long-term positive fundamentals of the videogame business, as we have over the last thirteen years, " Griffith stated.

"We recently renewed several high-profile intellectual property licenses for the long term. We also have the number one rated and best selling title on the Xbox 360. We believe the combination of high quality intellectual properties and strong development talent should have a positive impact on our future performance."

The statement prompted a marked drop in the company's share price, which fell to USD 12.26 in after-hours trading. A nominal increase places the share price at USD 13.17 at the time of writing.