Activision Q3 Profits up on Guitar Hero, Call of Duty

Activision Blizzard announced a profit for the third quarter, thanks to two important events: a reduction in costs and strong sales of titles like Guitar Hero 5. Shares rose 2 percent in afternoon trading on the news. The company also predicted lower fourth quarter numbers than what Wall Street expected, despite the pending release of Call of Duty: Modern Warfare 2, which ships next Tuesday.

For the third quarter, Activision reported a net income of $15 million - 1 cent per share - compared with a net loss of $108 million - 8 cents a share, for the same period a year ago. Net revenue dipped 1 percent in Q3 to $703 million. Excluding revenue that was deferred from the sale of certain titles, the company said revenue for the period would have been right around $755 million.

In the quarter Activision Blizzard increased its U.S. and European share 1.2 points over the previous year across all platforms to 12.3 percent and had two of the top-10 best-selling titles in the U.S.: Guitar Hero 5 and Guitar Hero World Tour, according to retail sales data from NPD Group (U.S.) and Charttrack and Gfk (Europe).

The top selling games for the quarter were Guitar Hero 5, Marvel: Ultimate Alliance 2, and older versions of Guitar Hero, Call of Duty and - of course - World of Warcraft.

For the fourth quarter, Activision is predicting earnings of 43 cents a share on revenue of $2.22 billion, on a non-GAAP basis. Analysts were expecting earnings of 44 cents a share on revenue of $2.3 billion. The fourth quarter will include the release of Modern Warfare 2, Tony Hawk: Ride, DJ Hero and Band Hero.

CD Projekt and Optimus complete transaction

Poland-based CD Projekt and Optimus S.A. have concluded a deal this week that will see the creator of The Witcher and the owner of the classic games web site Good Old Games get a 23 million dollar injection cash once the deal is complete. As part of the deal CD Projekt will retain control of the company (CD Projekt Group) and gain control of Optimus by acquiring 50 percent of the listed company’s shares. This also makes CD Projekt a publically traded company.

“This transaction represents the full realization of the strategic goals that CD Projekt’s owners set for themselves,” said CDP Investment stockholder Adam Kiciński in a statement of the company’s official web site this morning. “Above all, we will become a publicly listed company, which denotes access to capital. That in turn will spur further company growth. The immediate financing we obtained through the deal will allow us to pursue our operational goals in troubled times. We have gained all this while retaining control of the business, which was essential to us. The added spice of the contract is that we are merging with a corporation that, like CD Projekt, has been at the center of the Polish computer market throughout its history.“

Optimus S.A. is a Warsaw, Poland-based computer company that makes PCs and providing IT solutions for companies. In the 1990s Optimus S.A. was one of the leaders of the Polish computer market.

By the numbers: Tokyo Game Show

Video game industry sales decline by 29 percent inJuly

According to retail sales data from NPD Group revenue for the video game industry saw a major decline, finally putting to bed the question of whether or not the sector was in fact recession proof. A certain analyst whose name I won’t mention might have said that once, but you won’t hear such utterances from him about that now. It has been the fifth month that the interactive entertainment has seen a decline, according to NPD. Total sector revenue was $848.9 million, down dramatically from $1.2 billion a year ago.

Analysts expected a 15 percent decline in game, console and accessories spending in July, but what they got was nearly double that - a 29 percent drop overall. Hardware sales were the biggest losers in July, with a major decline in Nintendo Wii, PS3 and Xbox 360 sales. The Nintendo Wii saw a 54 percent drop in sales, the PS3 a 45 percent drop and the Xbox 360 was off by 10 percent. Hardware sales amounted to $280.9 million in July (a 37 percent decline), down from $447.7 million a year ago.

Analysts are saying that it is probably necessary for Sony, Nintendo and Microsoft to start thinking about cutting the prices of their respective systems, but Nintendo and Sony probably won’t - or at least that is what both have been saying for quite some time. We’ll see.

Digital River headed to GDC Europe, gamescom this month

Online retailer Digital River announced that it will be participating in the Game Developers Conference Europe (GDC), Aug. 17-19 at the Congress Centre East and gamescom, Aug. 19-23 at the Koelnmesse. Both events take place in Cologne, Germany.

At GDC Europe, the company will host an exhibit booth and an educational session, titled “Monetizing Games – Trends of Online Gaming.” Scheduled on Aug. 18, this session will offer attendees advice on launching and running a global gaming e-business. At gamescom, Digital River will host an exhibit booth, located in hall 4.2, booth E-22.

EA reports smaller than expected loss

Electronic Arts today released financial results for the first quarter that ended on June 30 of this year. While the news is grim, there is somewhat of a silver lining for one of the world’s largest game publishers. First and foremost, changes in accounting rules for deferred revenue impacted sales for the quarter coupled with a seasonal slump in the industry during the three month period.

EA reported a loss of $234 million, or 72 cents per share, before adjustments in the April to June period, compared with a loss of $95 million, or 30 cents per share, in the same quarter a year earlier. During the quarter, the company recorded a net revenue deferral of $172 million related to online-enabled packaged goods games and digital content as compared with a net benefit of $195 million in the first quarter of the prior year.

Revenue for the quarter also fell 20 percent to $644 million from $804 million a year ago. Excluding restructuring charges and various adjustments, EA lost 2 cents per share in the latest quarter. The good news is that EA managed to beat “the street,” who expected the company to post a loss of around 13 cents a share.

Some other good news: adjusted revenue for the first quarter clocked in at $816 million, up an impressive 34 percent from last year - way above the $729.5 million range that analysts had predicted.

Highlights for the first quarter included doubling sales of Wii games thanks to EA Sports Active (which sold over 1.8 million copies), 3.7 million copies of The Sims 3, $50 million of non-GAAP revenue in the quarter from EA Mobile (up 14 percent), and EA Digital non-GAAP revenue of $124 million (up 38 percent year-over-year).

Looking ahead the company expects better days in the second quarter. Madden NFL 10, which will be available on August 14 for various platforms, should give EA a large boost in sales numbers. EA also plans to sell virtual items in The Sims 3, as well as subscription-based online games - though that particular space, save Ultima Online, hasn’t been a successful sector for EA over the years.

EA expects GAAP net revenue to be between $3.7 and $3.85 billion; non-GAAP net revenue of approximately $4.3 billion; a GAAP diluted loss per share between $0.85 and $1.35; and non-GAAP diluted earnings per share of approximately $1.00.

Paul Eibeler joins Southpeak Board of Directors

SouthPeak Interactive announced that former Take-Two president and CEO Paul Eibeler has joined its Board of Directors. Paul Eibeler is best known for his leadership at Take-Two Interactive. As President and CEO, Take-Two grew from $250 million in revenue to over $1.3 billion during his tenure. Key titles, selling upwards of a million copies, included the Grand Theft Auto franchise, Max Payne, Midnight Club, Sid Meir’s Civilization, BioShock, and the development of 2K sports including products for NBA, NFL, NHL, and MLB.

Eibeler has held management positions at Impact International and Acclaim Entertainment prior to joining Take-Two. He was also a member of the Microsoft Xbox launch team. Presently he is chairman of Cokem International, a leading interactive software distribution company.