Activision 2Q Profit Soars, But Revenue Seen Dropping

Still, the Santa Monica, Calif.-based company reeled back revenue guidance for 2009 by 6% as it delayed two releases and forecast more difficult market conditions. The company also offered disappointing third-quarter guidance and expressed caution as to what impact the recession might have on its business.

"Given the continued economic uncertainty as well as hiring employment, we are monitoring the retail and consumer environment carefully," Thomas Tippl, the company's chief financial officer, said, according to a conference call transcript. He added that the company remained cautious.

Activision's comments come as the videogame sector, once considered recession-resistant, suffers through a long string of sales declines prompted by cautious consumers.

Still, the company's performance has been buoyed by strong sales of the latest installments of its "Guitar Hero" and "Call of Duty" franchises. It also released three movie-related games - "X-Men Origins," "Transformers: Revenge of the Fallen," and "Ice Age: Dawn of the Dinosaurs" - during the quarter.

Chief Executive Robert Kotick highlighted the "Prototype" and "World of Warcraft" games, which he said helped the company's North American and European market share rise 2.8 percentage points, to 12.7%.

Activision was formed in July 2008 by a merger with Vivendi SA's (12777.FR) Blizzard Entertainment, which makes comparisons difficult. The company's year-ago period reflects Blizzard's operations only.

Activision posted earnings of $195 million, or 15 cents a share, compared with $28 million, or 5 cents a share, a year earlier. Earnings excluding deferred revenue and other items fell to 8 cents from 14 cents. Net revenue nearly tripled to $1.04 billion. Adjusted for deferrals, revenue more than doubled to $801 million.

In May, Activision projected earnings of six cents on adjusted revenue of $775 million, below Wall Street expectations at the time.

Activision said it had three of the quarter's top 10 sellers in the U.S. with "Prototype," "Guitar Hero World Tour" and "Wolverine," according to market researcher NPD Group. Maintaining top-tier titles is important in the videogame industry, as fewer consumers risk spending their cash on lesser-known titles.

As the company reiterated its adjusted-earnings forecast for the year, it projected a third-quarter profit of three cents a share on adjusted revenue of $700 million. Analysts surveyed by Thomson Reuters, on average, projected 10 cents and $909 million, respectively. Releases during the quarter include "Guitar Hero 5," "Marvel: Ultimate Alliance 2" and "Wolfenstein." link.....