Net revenues for the third quarter were a record $816.2 million or 20% higher, as compared to $680.1 million for the third quarter of fiscal year 2005. Net income for the third quarter was $67.9 million, compared with net income of $97.3 million for the previous fiscal third quarter. Diluted earnings per share were $0.23 per diluted share, compared to $0.35 per diluted share reported for the prior fiscal third quarter.
For the nine-month period ended December 31, 2005, the company announced record net revenues of $1.28 billion, as compared to net revenues of $1.20 billion reported for the nine-month period last fiscal year. The company also announced earnings per diluted share for the nine-month period of $0.17, as compared to earnings per diluted share of $0.49 for the same period last fiscal year.
Robert Kotick, Chairman and CEO of Activision, Inc., commented, "Net revenues for the third quarter and first nine months of fiscal year 2006 were the highest in the company's history. According to NPD we were the #2 overall software publisher in the U.S. and remain the number #1 market share publisher for the Xbox 360. We ended the quarter with approximately $765 million in cash and short-term investments and $1.2 billion in shareholders' equity."
Kotick continued, "Despite these achievements, we were disappointed with our earnings performance this quarter which was the result of weaker than expected market conditions in the U.S. and Europe due to the transition from current-generation consoles to the next generation of video game systems."
"In the long term, we are planning for market growth that historically follows the introduction of new console hardware. To leverage this future growth and prepare for fiscal 2008, which we expect will be the biggest year in Activision's history, we will continue to focus on investment in our product development resources and intellectual property portfolio, growing our international operations and optimizing our worldwide cost structure and resource allocation," Kotick added.
Between October and December, Activision released eight new games: Tony Hawk's American Wasteland, Call of Duty® 2, Call of Duty® 2: Big Red One, Quake 4(TM), GUN(TM), True Crime®: New York City, Shrek® SuperSlam and The Movies(TM).
Business highlights include:
- Call of Duty 2 was the #2 best-selling PC game in the U.S. for the quarter, according to The NPD Group.
- Call of Duty 2 was also the #1 Xbox 360 title in the U.S., according to The NPD Group. The Xbox 360 game had the highest attach rate of any console launch in video game history.
- GUN was the #1 best-selling game based on a new intellectual property in the U.S., according to The NPD Group. GUN marks the third consecutive year that Activision has created the #1 new intellectual property in the marketplace.
- Tony Hawk's American Wasteland was the #4 best-selling title in the U.S., according to The NPD Group. The game marks the seventh title in the franchise that has been a Top 10 holiday title.
- For the quarter, Activision was the #2 publisher overall and the #1 publisher overall for the Xbox 360 platform, according to The NPD Group.
- On November 9, Activision and Marvel Entertainment expanded their long-term, broad-based strategic alliance by signing a multi-year extension to their current video game licensing agreements for the Spider-Man(TM) and X-Men(TM) franchises through 2017.
- On November 9, Activision signed an agreement with Spider-Man Merchandising L.P., a limited partnership between Marvel Entertainment, Inc. and Sony Pictures Consumer Products Inc., to extend its exclusive worldwide publishing rights to the phenomenally successful Spider-Man® motion pictures through 2017.
- On November 11, Activision signed a multi-year agreement with DreamWorks Animation which grants Activision the exclusive video game rights to four upcoming feature films from DreamWorks Animation -- "Bee Movie," "Kung Fu Panda," "Rex Havoc" and "How to Train Your Dragon." The deal also extends Activision's video game rights beyond "Shrek 3" to include potential future films in the "Shrek" franchise.
Based on weaker than expected market conditions in the third quarter, Activision revised its outlook for the fiscal year 2006 and the fourth quarter. For the fiscal year, Activision expects net revenues of $1.405 billion to $1.415 billion and earnings per share of $0.09 to $0.11. For the fourth quarter, the company expects $125 million to $135 million in net revenues and a loss per share of $0.07 to $0.09.
For fiscal year 2007, Activision expects net revenues to slightly exceed $1 billion and a modest increase in year-over-year earnings per share, excluding the impact of adopting FASB 123®, which relates to the expensing of stock options and other share-based payments. For fiscal year 2008, the company expects net revenues to exceed $1.6 billion.