Activision also expects that its recent acquisition of game developer Bizarre Creations will reduce earnings by approximately 2 cents to 3 cents a share in the second half of the fiscal year.

During the second quarter, Activision said it shipped more units of its internally developed, wholly owned franchise, Guitar Hero III: Legends of Rock, than any other game in the company's history. Within the first seven days of the product's launch, Activision said it sold more than $100 million worth of the game in North America.

Meanwhile, Activision's rival Electronic Arts ( ERTS) announced its upcoming game, Rock Band, which is set to compete with the Guitar Hero franchise, which will be released on Nov. 20.

The Rock Band game bundle, featuring a wired drum kit, microphone and guitar controller, will retail for $169.99 for Microsoft's ( MSFT) Xbox 360 and Sony's ( SNE) PlayStation 3 consoles.

Rock Band's release has led to fears that it could eat into sales of Activision's biggest hit, but analysts point out that Guitar Hero III is cheaper and is likely to have more boxes on shelves than Rock Band. Guitar Hero III, with a guitar-shaped controller, retails for $99.99 on GameStop ( GME).

Activision also said it plans to launch Call of Duty 4: Modern Warfare, the next game in its blockbuster franchise, Tuesday and will have all its holiday titles in North America on retail shelves by midweek.

During the second quarter, Activision's international publishing revenue grew 80% over the year before and the company doubled its console and handheld market share from 5% to 10% year in the U.S.

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