Activision Clearer on Sales

The video-game publisher says it will earn about 50% more than the analyst forecast in the current fiscal year.
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Updated from 4:48 p.m. EDT

The ongoing transition to new video-game hardware has been toughon software publishers, but things at

Activision

(ATVI) - Get Report

arefaring a bit better than expected right now.

The company on Thursday posted a narrower-than-forecast loss in its just-completed quarter on sales that exceeded the Street's estimates by more than 40%.

Additionally, the Santa Monica, Calif.-based company predicted that it would earn about 50% more than analysts had forecast in the company's current fiscal year.

Investors appeared heartened by the news. In recent after-hours trading, Activision shares were up more than 2% to $13.38.

In its fiscal fourth quarter, which ended March 31, Activision lost $9.2 million, or 3 cents a share, on $188.1 million in sales.

Those results were off from the year-ago period, when the company earned $3.6 million, or a penny a share, on sales of $203.9 million.

However, the results were much better than anticipated. Analysts polled by Thomson First Call were expecting the company to lose 8 cents a share on $132.3 million in sales in the quarter.

In February, Activision

forecast a loss for the period of 7 cents to 9 cents a share on sales ranging from $125 million to $135 million.

In the just-competed period, Activision didn't release any new titles; in contrast, the company released two new games in the same period a year-ago, company CFO Thomas Tippl said on a conference call, explaining the company's year-over-year drop in revenue.

However, Activision ended up selling more copies of its older games than expected, particularly of its "Call of Duty" World War II title, which has been the top-selling game on Microsoft's new Xbox 360, Tippl said.

Looking forward, Activision forecast a bumpier first quarter than Wall Street was expecting. The company expects to lose 11 cents a share, or 10 cents a share minus the cost of stock options, on sales of about $145 million in the current quarter.

The sell side had predicted a loss of 2 cents a share in the period on sales of $175.6 million. In the same period last year, Activision lost $3.6 million, or 2 cents a share, on $241.1 million in sales.

The forecast decline in the top line is partly the result of Activision's plan to release fewer titles in the quarter than the year-ago period, Tippl said. The company also factored in a decline in prices of games for older consoles. Activision expects the retail price of both of the major releases it plans for the quarter to be at about $40, compared with last year, when prices were at $50 or higher, he said.

But the company expects things to improve as the year goes on, at least on the bottom line, if not on the top line. For the full year, Activision expects to earn 10 cents a share, or 15 cents a share without options costs, on sales of $1.03 billion.

For the full year, analysts were predicting earnings of 10 cents a share without options costs on sales of $1.08 billion. Activision had previously offered guidance of a modest increase in earnings over fiscal 2006 on sales of a little more than $1 billion.

In fiscal 2005, Activision earned $41.9 million, or 14 cents a share -- which doesn't include options costs -- on sales of $1.47 billion.

Activision announced last quarter that it planned to cut back the number of titles it releases this fiscal year in response to softening demand during a transition year. The company plans to release a full slate of titles in fiscal 2008, to coincide with the planned upsurge in sales of next-generation game machines.

Among the titles the company plans for next year are new versions of many of its biggest past hits, including new

Spider-Man

,

Shrek

and

Tony Hawk

games. The company expects sales to hit $1.6 billion next fiscal year.

"In fiscal '08, we'll begin to reap the benefits of our next generation development," said Michael Griffith, CEO of Activision's publishing division, on the call.

Shares of Activision fell 55 cents, or 4%, in regular trading to $13.09, after chief rival

Electronic Arts

(ERTS)

offered a disappointing outlook for fiscal 2007 on Wednesday.