Net revenues were $188 million, as compared to $241 million reported for the first quarter last fiscal year. For the first quarter, the company reported a net loss of $18 million, or a loss per share of $0.06 including equity-based compensation, as compared to the company's previous outlook of a loss per share of $0.11. Excluding the impact of equity-based compensation, the company had a loss per share of $0.05, as compared to the company's previous outlook of a loss per share of $0.10. For the previous year's first quarter, the company reported a net loss of $3.6 million, or a loss per share of $0.01. A reconciliation of the company's non-GAAP financial measures to the most comparable GAAP financial measures appears at the end of this press release.

Robert Kotick, Chairman and CEO of Activision, Inc. commented, "Activision delivered better-than-expected results for the first quarter and our balance sheet remains one of the strongest in the industry. We are excited about our strong launch lineup for the PlayStation 3 and Nintendo Wii, as well as our solid slate for the Xbox 360. While there is still uncertainty with respect to the opportunities next-generation consoles will provide this fiscal year, we remain confident about the long-term industry prospects and our ability to realize superior returns for our shareholders."

Business Highlights

Activision's results for the quarter were driven by the release of Over the Hedge for the PlayStation 2 computer entertainment system, Xbox video game system, Nintendo GameCube, PC, Nintendo Game Boy Advance and Nintendo DS and X-Men: The Official Game for the Xbox 360 video game and entertainment system from Microsoft, PlayStation 2 computer entertainment system, Xbox video game system, Nintendo GameCube, PC, Nintendo Game Boy Advance and Nintendo DS.

• According to The NPD Group, Call of Duty 2 remains the #1 Xbox 360 game to date.
• In April, Activision was awarded the rights to the James Bond license through 2014. Since the initial release of Dr. No in 1962, James Bond films have grossed more than $3.6 billion theatrically worldwide, and approximately 30 million units of video games based on the world of James Bond have been sold to date. Bond is one of the most successful franchises in film history and continues to have popular global appeal.
• In May, the company announced an exclusive multi-year agreement with Mattel, Inc. to distribute video games based on the Barbie brand. The video games are expected to be available at retail stores worldwide this fall.
• In June, Activision acquired video game publisher RedOctane, Inc., the publisher of the popular Guitar Hero franchise. The acquisition provides Activision with an early leadership position in music-based gaming, which the company expects will be one of the fastest growing genres in the coming years. Guitar Hero ranked as the #4 best-selling title overall for the month of June and has remained a top-10 selling title for calendar 2006, according to The NPD Group.
• In June, Activision opened a publishing office in Seoul, Korea, one of the fastest growing gaming markets in Asia, through the acquisition of CSR Entertainment's software distribution operations. The new office will enable Activision to fully leverage its product portfolio in the territory, particularly the upcoming online multiplayer action game Enemy Territory: Quake Wars, the prequel to id Software's legendary QUAKE II.

Company Outlook

For the second quarter of fiscal 2007, Activision expects net revenues of $130 million and a loss per share of $0.13, which excludes equity-based compensation of $0.01 per share.

For fiscal 2007, Activision is raising its net revenues outlook to $1.075 billion. The company expects earnings per diluted share of $0.15, which excludes equity-based compensation of $0.05.

Activision also reaffirmed its fiscal year 2008 outlook. The company expects net revenues to exceed $1.6 billion.

Non-GAAP Financial Measures

To supplement Activision's consolidated financial statements presented in accordance with GAAP, the company provides non-GAAP net income (loss) and non-GAAP net income (loss) per share data which is defined as net income (loss) excluding expenses related to stock options, employee stock purchase plan, and restricted stock under Statement of Financial Accounting Standards No. 123 (revised 2004), "Share Based Payment" and the associated tax benefit.

Management believes that the presentation of these non-GAAP financial measures provide investors with additional useful information to measure the company's financial performance. These non-GAAP financial measures are not determined in accordance with generally accepted accounting principles (GAAP) and should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with GAAP. The limitations of non-GAAP net income (loss) are that, it does not include certain costs, and the term non-GAAP net income (loss) does not have a standardized meaning. Therefore, other companies may use the same or similarly named measure but exclude different items, which may not provide investors a comparable view of the company's performance in relation to other companies in the same industry.

Management compensates for this limitation by presenting the most comparable GAAP measure, net income, directly ahead of non-GAAP net income (loss) in this earnings release and by providing a reconciliation that shows and describes the adjustments made. Management does not believe these limitations are material, particularly when such measure is disclosed with its most comparable GAAP financial measure, net income (loss). A reconciliation of GAAP net income (loss) to non-GAAP net income (loss) is provided in the accompanying tables.