Novice Investing - Activision Blurry Guidance

Date: Monday 01st 2008f December 2008 04:35:21 PM

Activision Blurry Guidance - 12/14/2005

By: Novice Investing Staff

Late Wednesday, Activision Inc. (ATVI) reduced its profit and sales projection for the current quarter. Management stated the disappointment due to the slower than expected catalogue sales. The company did not specify how much it would earn but did say that earning will come in 'significantly' below projection. On November 2005, management guided investors to expect profit of 52 cents for the third quarter of 2005 and 5 cents of profit for the fourth quarter of 2005. Activision fiscal year ends on March 2006.

Activision is in the software entertainment business. Its products is offered through game consoles such as Play Station 2, Microsoft Xbox, and Nintendo Game Cube. Visiting its website at http://www.activision.com will show you the company's product offering.

Activision is not a company that is in danger of filing bankruptcy anytime soon. The latest balance sheet shows the company having a positive net cash of $ 750 Million or $ 2.75 per share. Before the warning, the company was expected to earn $ 0.56 per share for the current fiscal year. We believe that even with the warning, Activision is still expected to book profits for this fiscal year and the next.

The problem with Activision is how to turn around its sluggish sales with its product offering. Fellow competitors Take Two Interactive (TTWO) too experience similar problems. After its mega hit release, The Grand Theft Auto was rated R by game commissioners, Take Two need to come up with a blockbuster new games to replace the lost revenue. So far, it has bought the developers of Civilization franchise, which is a pretty popular game. To revive revenue, Activision needs to gain momentum by releasing quality products that appeals to gamers.

In after hour trading Wednesday, shares of Activision tumbled 14.2 % to $ 12.26. Analysts expect earning to be $ 0.63 per share for the next fiscal year. While Activision is not overvalued, it has not reached a good buying point, yet.

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Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding Activision Inc. (ATVI) or any other securities.

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