Profit Sinks at Activision

Analysts had predicted far better results, forecasting 46 cents a share in earnings in fiscal 2007 on $1.48 billion in sales and 67 cents a share on sales of $1.81 billion in fiscal 2008.

Company officials attributed the muted outlook for the coming quarter and next fiscal year to their efforts to scale back the number of games the company will release. Activision won't release any new games this quarter, for instance, and pushed an unspecified number of games out of fiscal 2007 and into fiscal 2008, they said.

The company plans "to launch a more focused slate" of games this year, Griffith said. "We're focused on driving the breadth and quality of our slate and the efficiency in our business model."

Activision officials attributed the company's sales gain in the just-completed quarter to its large lineup of titles. The company ended the year as the No. 2 publisher in North America in terms of market share and had the top-selling title during the holiday on the Xbox 360 with its Call of Duty 2 game.

But the company had a number of disappointments. Sales of Gun, a new western-themed game, fell shy of the company's expectations, as did True Crime: New York City, the latest version of the company's gangster-themed game. Additionally the company's The Movies title, another holiday-quarter release, performed so poorly as a game for the PC that the company cancelled plans to port it over to the PlayStation 2 and other game consoles.

The problem Activision had with True Crime, at least, had to do with quality, Griffith said, saying that the game "fell short" of the company's expectations.

As a result of the problems with True Crime and Gun, the company hasn't yet committed to doing a sequel of either game, Griffith said.

"We're examining the franchises for their future potential," he said.