"Guitar Hero" helps Activision rock Wall Street

By Scott Hillis

SAN FRANCISCO (Reuters) - Activision Inc (ATVI.O: Quote, Profile, Research) posted a quarterly profit on Thursday that blew past expectations as demand for its "Guitar Hero 3" and "Call of Duty 4" video games made up for a complete lack of new releases.

The two games, released late last year, drove Activision to a profit, excluding stock-based compensation costs, of just under $55 million, or 17 cents per share, more than triple the average expectation of 5 cents among Wall Street analysts on Reuters Estimates.

Revenue was $602.5 million, towering 93 percent above a year ago and burying the average estimate of $373.6 million.

"It's the ongoing popularity of 'Guitar Hero' and 'Call of Duty'. It just shows what can happen in terms of performance when you have blockbuster hit titles," said Colin Sebastian, an analyst with Lazard Capital Markets.

Shares of Activision rose 3.9 percent to $28.78 in extended trade from a close of $27.70 on Nasdaq, where they had gained less than 1 percent in the regular session.

Activision's results were the latest piece of evidence that the video game industry is shrugging off the concerns about the broader economy weighing on other sectors.

"The video-game market fundamentals have never been stronger. There's no evidence that this growth will slow," Chief Executive Bobby Kotick told a conference call.

Activision's results came the day after rival Take-Two Interactive Software Inc (TTWO.O: Quote, Profile, Research) said its criminal action game "Grand Theft Auto 4" had pulled in $500 million in revenue in its first week, making it one of the biggest entertainment launches ever.  Continued...