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Activision Inc. (ATVI)
Activision Rocks its Way to the Bank
With graphics as life-like as movies and television, plus the ability to play online with other gamers, it's no wonder that video game companies are seeing profits similar to their entertainment industry counterparts. The medium embraces Web 2.0 interaction, has become an advertising platform, and has launched titles so popular that they have become their own franchises. Activision Inc., the second-largest video game publisher in the U.S., has found a hit in its popular game franchise Guitar Hero, and is rocking its way straight to the bank. The company's rivals are hot on its heels, however, and are preparing to release games directly competing with its number one seller. Will Activision's loyal followers allow the company to keep climbing to the top of the leader board?
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Not familiar with Guitar Hero? Didn't buy Call of Duty? Just mention these titles to any 14-25 year old male and you'll be sure to get an enthusiastic affirmation. It's not just the video-game playing public that has caught on to the success of this industry; however, investors have found a goldmine as well. Activision has been enjoying a steady rise in stock price in recent months as shares have increased 25 percent since August alone. This quarter's earnings statement further bolstered the company's position as an entertainment industry contender.
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Analysts were calling for a loss of one cent per share when Activision announced their quarterly earnings today. Pleased with the ability to report some positive news instead, Activision reported net income of $700,000, or break-even earnings per share, on a 69% rise in revenue to $317.7 million. During the same quarter last year, the company faced a loss of $24.3 million, or 9 cents per share. The company has decided that this strong run will continue and has guided results higher for the third quarter as well as the full fiscal year. Activision is expecting revenues of $1.05 billion and earnings of 51 cents per share in the third quarter, as the holiday season will likely prompt further jumps in sales.
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Activision has been lucky enough to have several popular games in distribution at the same time. Not only known for its Guitar Hero series, the company also produces Transformers, and the Call of Duty franchise. Both Guitar Hero and Call of Duty have new releases being launched in anticipation of the holiday shopping season. Guitar Hero III: Legends of Rock shattered company records with than $100 million in sales generated in the first seven days of its launch in North America alone. The company's international popularity is on the rise as well, with international publishing revenue increasing 80 percent over last year.
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Activision may have doubled its U.S. market share from 5 percent to 10 percent this quarter, but it still faces some veritable competition. Rival Electronic Arts (ERTS: Charts, News, Offers) just announced a musically-inspired game of its own and will be releasing Rock Band on November 20. Designed for Microsoft's (MSFT: Charts, News, Offers) Xbox 360 and Sony's (SNE: Charts, News, Offers) PlayStation 3 gaming systems, the game is set to retail for $169.99. Guitar Hero III, however, retails for $99.99 (yes, that includes the guitar-shaped controller) and is expected to have a larger presence on store shelves in terms of number of units available. The victor will be up to the gamers themselves, but the legion of aficionados that have driven the success of the franchise thus far, don't appear to be ready to jump of the bandwagon just yet.
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