Analysts: Strong Quarter For Activision, Good Prospects

Following yesterday's news of a strong quarter for the firm, analysts from Lazard Capital Markets and Wedbush Morgan were bullish, citing sales of Lego Star Wars and Guitar Hero in raising revenues for publisher Activision. As reported yesterday, net revenues for Activision's second quarter ending September 30, 2006 were $188.2 million, a 45% increase over the company's prior outlook of $130.0 million, due to "strong performance of the company's product portfolio, improving market conditions and the strength of the company's distribution and affiliate businesses." In his latest notes, Lazard's Colin Sebastian said, "We believe the strong top-line results reflect sales of affiliate title Lego Star Wars in Europe as well as strong catalog sales of Guitar Hero and Call of Duty." Wedbush Morgan's Michael Pachter agreed, saying "The company cited significantly higher revenues due to strong game sales, improving market conditions, and strength in its distribution business. In particular, we believe that Activision had strong sales (though at low margin) of its copublished/distribution of LucasArts’ LEGO Star Wars II in Europe." Both analysts were careful not to make any final judgments on the company following news that its internal options investigations are still on-going. Activision announced along with its results yesterday that it does not expect to be in a position to finalize its financial results for the second quarter until a committee has completed its internal review of the company's historical option grant practices. The SEC announced its own investigation into the allegations, which have affected many leading tech and game companies, back in July. Added Pachter, "Our positive long-term thesis on Activision is unchanged. We think Activision has a deep and talented management team and are confident that they will be able to resolve this without any significant impact on its long-term prospects."