Bloomberg News

Activision Rises After Forecasts Allay Concerns

May 05, 2006

Shares of Activision Inc., the second- biggest U.S. video-game maker, rose the most in more than two years after the company's forecast for the next two years reassured investors worried about the industry slowdown.

Activision reiterated a fiscal 2007 forecast for sales of $1.03 billion and profit of 15 cents a share, excluding stock- option costs. The Santa Monica, California-based company predicted a 2008 turnaround, with sales exceeding $1.6 billion.

The company and its larger rival, Electronic Arts Inc. (EA:US), are struggling with declining sales as the industry awaits new game players from Sony Corp., the largest maker of video-game consoles, and Nintendo Co. They're also spending to develop titles for those machines and the new Xbox 360 from Microsoft Corp. that came out in November.

``All eyes were on guidance,'' Wedbush Morgan Securities analyst Michael Pachter said in an e-mail yesterday after the company reported a fourth-quarter loss and issued its forecasts. ``The guidance was in line with expectations, but there was a lot of concern they might lower.''

Today, Los Angeles-based Pachter raised his rating on the shares to ``strong buy'' from ``buy.''

Shares of Activision, whose titles include ``Call of Duty 2,'' rose $1.67, or 13 percent, to $14.76 at 4 p.m. New York time in Nasdaq Stock Market composite trading, the most since December 2003. The have gained 7.4 percent this year.

Activision late yesterday reported a fourth-quarter loss of $9.22 million, or 3 cents a share, compared with a profit of $3.57 million, or 1 cent, a year earlier. The loss was narrower than the 8 cents predicted by Piper Jaffray & Co.'s Anthony Gikas.

Sales in the quarter ended March 31 declined 7.7 percent to $188.1 million from $203.9 million, beating the $131.1 million average estimate of 23 analysts surveyed by Thomson Financial.

Today, THQ Inc. (THQI:US), maker of video games including ``Destroy All Humans!'' posted a fourth-quarter loss as demand slumped. The shares rose after the company said it may still meet the full- year forecast.

To contact the reporter on this story: John Stebbins in Chicago at stebbins@bloomberg.net

To contact the editor responsible for this story: Emma Moody at emoody@bloomberg.net


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Companies Mentioned

  • EA
    (Electronic Arts Inc)
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