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Profit soars for games maker EA
October 24, 2002 -
Holiday worries sink game makers
October 22, 2002
Activision reported a net income of $9.1 million, or 13 cents a share, for the period ended Sept. 30, compared with $2.2 million and 4 cents a share in the same period last year. Analysts polled by First Call had expected earnings of 10 cents a share. Revenue was $169.2 million, up from $139.6 million a year ago.
The company also boosted financial forecasts for the remainder of the current 2003 fiscal year. The company now expects annual revenue of $934 million, up from the previous forecast of $920 million, and per-share earnings of $1.29, up from $1.25.
The upbeat forecast, combined with a major earnings surprise last week from leading game publisher Electronic Arts, has helped deflate earlier worries that the game industry might not perform up to expectations during the critical holiday shopping season.
William Chardavoyne, CFO of Activision, said the company expected a strong holiday season, thanks in no small part to the release last week of "Tony Hawk's Pro Skater 4," the latest installment of the hit skateboarding game.
"We're very encouraged about the holiday season," he said. "I think our ability to sell top franchises like 'Tony Hawk' in the marketplace is extremely easy."
Activision's financial forecasts are somewhat conservative because they assume a $40 average selling price for new console games, compared with the current standard price of $50. There are no signs yet of the industry weakening on the $50 price, but Chardavoyne said he expects that to happen soon enough when a major publisher needs to boost unit sales.
"We have always said we expect that prices are going to come down," he said. "We had expected that was going to happen by Jan. 1. But right now, we're scheduled to bring all our products at the premium ($50) price point."
