Activision Slashes Outlook on Weak Sales of Video Games

Activision Inc., with weaker- than-expected holiday sales of its video games, Tuesday cut its revenue and profit projections for the quarter and full year.

The Santa Monica publisher said sales for the fiscal year ending March 31, 2003, probably will be $823 million, 12% lower than projections it made in October. It also expected profit to be 32% lower at 88 cents a share.

Shares of Activision, which added 8 cents to close at $15.73 in regular Nasdaq trading, dropped after the announcement to a 52-week low of $13 in after-hours trading. Other game stocks also slid.

“We still expect to grow revenues and net income this fiscal year,” President Ron Doornink said.

Although sales of the latest installment of its “Tony Hawk” franchise have been strong, other titles have not fared as well. “Tony Hawk’s Pro Skater 4” sold 422,000 copies, generating $24 million in retail sales last month, but “Minority Report” earned $400,000, far less than expected, said analyst Michael Pachter, analyst of Wedbush Morgan Securities Inc. who is re-evaluating his “buy” rating.

“Clearly, they’re writing off a bunch of games,” Pachter said.

For the quarter ending Dec. 31, Activision projected $362 million in sales, down 17% from previous estimates, and earnings of 60 cents a share, down 27%. For fiscal 2004, it projected flat sales at $823 million and declining profit with earnings of 80 cents a share.

Goldman Sachs downgraded Activision and two other video game firms Friday, citing slower industry growth in 2003.